Steps in Limiting Factors

Limiting Factor

Definition:

Limiting factor refers to a resource which is short in supply and that because of its shortage limits an organization output.

Steps to be taken to arrive optimal production plan under the condition of limiting factor:

1. Identify the limiting factor
2. Calculation of contribution per unit of each product
3. Calculation of contribution per limiting factor of each product
4. Ranking of the product on the basis of per limiting factor
5. Allocation of limited resource arrive at the optimal production plan.