ExpertEasy2 marksMultiple Choice
ACCA · Question 21 · Limiting Factor Analysis
Section B - Case 2: BioNutri
BioNutri manufactures two specialized nutritional supplements: Alpha and Beta. Both products require processing on a specialized mixing machine. The machine is available for a maximum of 1,200 hours per month.
Product details:
Alpha: Selling price $50, Variable cost $30, Machine hours per unit: 2 hours. Maximum demand: 400 units.
Beta: Selling price $70, Variable cost $40, Machine hours per unit: 4 hours. Maximum demand: 300 units.
What is the contribution per limiting factor for Product Alpha?
Section B - Case 2: BioNutri
BioNutri manufactures two specialized nutritional supplements: Alpha and Beta. Both products require processing on a specialized mixing machine. The machine is available for a maximum of 1,200 hours per month.
Product details:
Alpha: Selling price $50, Variable cost $30, Machine hours per unit: 2 hours. Maximum demand: 400 units.
Beta: Selling price $70, Variable cost $40, Machine hours per unit: 4 hours. Maximum demand: 300 units.
What is the contribution per limiting factor for Product Alpha?
Answer options:
A.
$7.50 per hour
B.
$10.00 per hour
C.
$20.00 per hour
D.
$25.00 per hour
How to approach this question
Calculate the contribution per unit (Selling Price - Variable Cost). Then divide by the number of machine hours required per unit.
Full Answer
B.$10.00 per hour✓ Correct
Contribution per unit for Alpha = $50 - $30 = $20.
The limiting factor is machine hours. Alpha takes 2 hours per unit.
Contribution per limiting factor (machine hour) = $20 / 2 hours = $10 per hour.
Common mistakes
Stopping at the contribution per unit ($20) and not dividing by the limiting factor.
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