Page 113 - PM Integrated Workbook 2018-19

Planning with limiting factors

Discussion aspects

4.1 Assumptions

 There is a single quantifiable objective, e.g. maximise contribution. In reality,
there may be multiple objectives such as maximising return, whilst
simultaneously minimising risk.

 Each product always uses the same quantity of the scarce resource per unit. In
reality, this may not be the case. For example, learning effects may be enjoyed.

 The contribution per unit is constant. In reality this may not be the case, as the
selling price may have to be lowered to sell more and there may be economies
of scale, for example a discount for buying in bulk.

 Products are independent – in reality, customers may expect to buy both
products together, or the products may be manufactured jointly together.

The assumptions apply to the analysis used when there is one limiting factor or if
there are multiple limiting factors.

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