Page 163 - 5.2 i. Manac Costing ITC Summarised Notes

DECISION MAKING

Decision Making Where Constraints Exist

• Where there are limited resources available (material,

labour hours, machine hours, etc) a constraint could exist

which prevents a company from manufacturing their full

market demand.

• The primary objective, obviously, is to maximise profits.

Profits are maximised by maximising contribution or

marginal income. The question is , how one maximises

contribution when faced with limited resources???

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