Cost Accounting

A limiting factor may be defined as ‘any factor, which has a limiting effect on the activities of an undertaking at a point in time over a specific period’

The decision-making strategy, which managements wish to pursue, may be constrained because of shortage of manpower, machinery, material, money, markets or a combination of these. It may also be affected by the availability of management expertise and methods improvement capability.

In short term decision making where one or more factors will limits the strategy which may be implemented, it is likely that profit maximization will be seen as a major decision making goal. It should be noted however that in practice a number of goals will form part of the objective of an organization. In addition to short term profits management will wish to consider a number of longer term goals, for example

• Consolidation of market share
• Product leadership
• Good industrial relations
• Improving longer term productivity and profitability
• Quality leadership
• Employee and customer satisfaction
• Social responsibility

This balance between short and long term goals is likely to lead to decisions which are profit satisfying rather than profit maximizing resulting in the satisfactory profit level being earned in the short term

Single Limiting factor

Where a single limiting factor exists the decision making sequence may be implemented as follows:-

• Calculate the contribution per unit of limiting factor for each product
• Rank the products in order of size and contribution per unit of limiting factor
• Allow any minimum retention of less profitable products which is decided upon
• Use up the total units of the limiting factor in order to fulfill the forecast quantities in order of product ranking.

Other Custom Business Writing services

Businesswritingservices.org offers other custom business writing services such as Management writing services: Management essays, Management Dissertations, Management company analysis, Management Research papers and term papers: Finance writing services: Finance essays, Finance Dissertations, Finance case study analysis, Finance Research papers and term papers: Economics Writing Services: Economics essays, Economics Dissertations, Economics thesis, Economics Research papers and Economics term papers: Marketing Writing Services: Marketing essays, Marketing Dissertations, Marketing company analysis, Marketing Research papers and term papers:Business Writing Services: Business Essay, Business Research paper, Business term paper, Business Dissertation, Business Thesis, Business Case study: Auditing Writing Services: Auditing essays,Auditing Research papers, Auditing term papers, Auditing Dissertation, Auditing Thesis, Auditing Case study: Business information systems: Business information systems essays, Business information systems Research papers, Business information systems term papers, Business information systems Dissertation, Business information systems Thesis, Business information Case study: Taxation writing services: Taxation essays, Taxation Research papers, Taxation term papers, Taxation Dissertation, Taxation Thesis, Taxation Case study:Human resources writing services: Human resources essays, Human resource Dissertation, Human resources Thesis, Human resources case study, Human resources Research papers and term papers: Business law writing services: Business law essays, Business law Research papers and term papers, Business law dissertation, Business Thesis, Business law case study. Join the rest of our Business Writing services at Business Writing Services.org.