Limiting factor
Q. In a factory producing two different kinds of articles,the limiting factor is availability of material but the same material is used in both articles:
The demand during each period for the two products is 10,000units of A and 8,000 units of B. It is also considered desirable that, should demand be there, the firm should be willing to meet at least half the demand stated above in all circumstances. The total availability of materials for sometime will be restricted to the quantity available for $120,000 only.
State how the available raw material would be utilized.
Ans. In all these problems it is necessary to understand the limiting factor and find the contribution for each product based on the limiting factor.
And then analyze any additional constraints which are given.
Here the limiting factor is the availability of raw materials so we need to find the contribution for each product per unit of material used which is as given below:
Its mentioned that the firm needs to meet at least half the demand for product A and product B at all times.
Demand for A = 10000
Demand for B = 8000
So the firm needs to produce at least 5000 units of Product A and 4000 units of product B.
Raw material consumed = 5000*15 + 4000*10 = $115,000
Total available raw material is worth $120,000
So the remaining 120000 – 115000 = $5000 worth of raw material should be used by the firm to manufacture the product which gives maximum contribution which is product B.
The number of units of product B that can be produced in$5000 are = 5000/10 = 500 units.
Ans. So the firm should use the raw materials such that they produce 5000 units of product A and 4500 units of product B.
Q. In a factory producing two different kinds of articles,the limiting factor is availability of material but the same material is used in both articles:
The demand during each period for the two products is 10,000units of A and 8,000 units of B. It is also considered desirable that, should demand be there, the firm should be willing to meet at least half the demand stated above in all circumstances. The total availability of materials for sometime will be restricted to the quantity available for $120,000 only.
State how the available raw material would be utilized.
Ans. In all these problems it is necessary to understand the limiting factor and find the contribution for each product based on the limiting factor.
And then analyze any additional constraints which are given.
Here the limiting factor is the availability of raw materials so we need to find the contribution for each product per unit of material used which is as given below:
Its mentioned that the firm needs to meet at least half the demand for product A and product B at all times.
Demand for A = 10000
Demand for B = 8000
So the firm needs to produce at least 5000 units of Product A and 4000 units of product B.
Raw material consumed = 5000*15 + 4000*10 = $115,000
Total available raw material is worth $120,000
So the remaining 120000 – 115000 = $5000 worth of raw material should be used by the firm to manufacture the product which gives maximum contribution which is product B.
The number of units of product B that can be produced in$5000 are = 5000/10 = 500 units.
Ans. So the firm should use the raw materials such that they produce 5000 units of product A and 4500 units of product B.
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