CIMA P1 Syllabus C. Short-term Decision Making - Limiting factor - Notes ^{1 / 5}

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