Identifying Limiting Factors in a Scarce Resource Situation

NotesQuizCBE

Limiting Factor

A limiting factor is the factor (aspect of business/resource) that limits an organisation’s activities.

For many businesses, this may frequently be the level of sales that can be achieved but at other times a business may be limited by a shortage of a resource which prevents the business from achieving its sales potential.

Other examples of limiting factors would include:

  1. supply of skilled labour;

  2. supply of materials;

  3. factory space;

  4. finance;

  5. plant capacity; and

  6. market demand.

A business may face a single constraint situation however, others may face a multi constraint scenario.

Limiting factor analysis

looks at product mix decisions from a financial perspective only.

The main objective in limiting factor analysis is:

  • Profit Maximisation

NotesQuizCBE