1 / 8

Prepared by Diane Tanner University of North Florida

Chapter 9. Resource Allocation Decisions. Prepared by Diane Tanner University of North Florida. Production Constraints. 2. Constraints occur when the capacity to manufacture a product or provide a service is limited in some manner Examples Labor Skilled craftspeople Facilities

reece
Download Presentation

Prepared by Diane Tanner University of North Florida

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 9 Resource Allocation Decisions Prepared by Diane Tanner University of North Florida

  2. Production Constraints 2 • Constraints occur when the capacity to manufacture a product or provide a service is limited in some manner • Examples • Labor • Skilled craftspeople • Facilities • Special machinery • Limited factory space • Materials • Limited availability

  3. Limited resources may cause management to focus on the constraint instead of the contribution margin per unit Goal Determine the most profitable allocation of resources i.e., which product will contribute the most to profit Influence of Constraints 3

  4. Decisions When Resources are Limited 4 • If products are mutually exclusive • When events do not occur at the same time • i.e., a customer will buy one product instead of the other; does not insist that both be purchased • If products are not mutually exclusive • When customers insist on having more than one product available

  5. Limited Resource Decisions When Products are Mutually Exclusive 5 How to select products to produce/sell Step 1: Determine contribution margin per unit per constrained resource of each product/service Step 2: Choose the product/service with the highest CM per constrained resource to produce; Produce zero of the other products

  6. Limited Resource Decisions When Multiple Product Production Required 6 How to select products to produce/sell • Step 1: Determine contribution margin per unit per constrained resource • Step 2: Choose the product/service with the lowest CM per constrained resource to produce the product with the minimum quantity required • Step 3: Determine the resource used for the product with minimum units Continued

  7. Limited Resource Decisions When Multiple Product Production Required (cont) 7 Step 4: Subtract the resource to be used for the product with minimum units from the total resource available Step 5: Allocate the remaining resource to the second product

  8. The End

More Related