{"id":24364,"date":"2023-10-27T14:34:40","date_gmt":"2023-10-27T13:34:40","guid":{"rendered":"https:\/\/thefinancialeducation.co.uk\/?p=24364"},"modified":"2026-07-16T12:01:45","modified_gmt":"2026-07-16T11:01:45","slug":"session-13","status":"publish","type":"post","link":"https:\/\/thefinancialeducation.co.uk\/index.php\/2023\/10\/27\/session-13\/","title":{"rendered":"408AF: Session 19"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong><abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>Limiting Factors<\/abbr> in <abbr class='c2c-text-hover' title='Financial and non-financial expressions of the objectives of departments or functions in an organisation.'>Budgets<\/abbr><\/strong><\/p>\n\n\n<style>.kt-accordion-id24364_fbd057-29 .kt-accordion-inner-wrap{column-gap:var(--global-kb-gap-md, 2rem);row-gap:10px;}.kt-accordion-id24364_fbd057-29 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;background:#ffffff;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);}.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top:0px solid #f2f2f2;border-right:0px solid #f2f2f2;border-bottom:0px solid #f2f2f2;border-left:0px solid #f2f2f2;border-top-left-radius:6px;border-top-right-radius:6px;border-bottom-right-radius:6px;border-bottom-left-radius:6px;background:#f2f2f2;color:#555555;padding-top:14px;padding-right:16px;padding-bottom:14px;padding-left:16px;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap .kt-blocks-accordion-icon-trigger:before{background:#555555;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger{background:#555555;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger:before{background:#f2f2f2;}.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29 .kt-blocks-accordion-header:focus-visible{color:#444444;background:#eeeeee;border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:before, body:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-blocks-accordion--visible .kt-blocks-accordion-icon-trigger:after, body:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:before{background:#444444;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger, body:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger{background:#444444;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:before, body:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:after, body:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:before{background:#eeeeee;}.kt-accordion-id24364_fbd057-29 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{color:#ffffff;background:#f3690e;border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:before{background:#ffffff;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger{background:#ffffff;}.kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id24364_fbd057-29:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:before{background:#f3690e;}@media all and (max-width: 1024px){.kt-accordion-id24364_fbd057-29 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;}}@media all and (max-width: 1024px){.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top:0px solid #f2f2f2;border-right:0px solid #f2f2f2;border-bottom:0px solid #f2f2f2;border-left:0px solid #f2f2f2;}}@media all and (max-width: 1024px){.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29 .kt-blocks-accordion-header:focus-visible{border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}}@media all and (max-width: 1024px){.kt-accordion-id24364_fbd057-29 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}}@media all and (max-width: 767px){.kt-accordion-id24364_fbd057-29 .kt-accordion-inner-wrap{display:block;}.kt-accordion-id24364_fbd057-29 .kt-accordion-inner-wrap .kt-accordion-pane:not(:first-child){margin-top:10px;}.kt-accordion-id24364_fbd057-29 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;}.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top:0px solid #f2f2f2;border-right:0px solid #f2f2f2;border-bottom:0px solid #f2f2f2;border-left:0px solid #f2f2f2;}.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id24364_fbd057-29 .kt-blocks-accordion-header:focus-visible{border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}.kt-accordion-id24364_fbd057-29 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id24364_fbd057-29 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}}<\/style>\n<div class=\"wp-block-kadence-accordion alignnone\"><div class=\"kt-accordion-wrap kt-accordion-id24364_fbd057-29 kt-accordion-has-12-panes kt-active-pane-0 kt-accordion-block kt-pane-header-alignment-left kt-accodion-icon-style-basic kt-accodion-icon-side-right\" style=\"max-width:2000px\"><div class=\"kt-accordion-inner-wrap\" data-allow-multiple-open=\"false\" data-start-open=\"0\">\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-1 kt-pane24364_b6dfdc-b8\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Aims &amp; Objectives<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p class=\"wp-block-paragraph\">To obtain knowledge of the <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr> in an organisation<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To identify the <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr> in a case study scenario<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To apply the <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing method to compute the contribution<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To assess the mix of products to maximise contribution and profit<\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-2 kt-pane24364_d81251-1c\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Introduction<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<ul class=\"wp-block-list\">\n<li>In this session, you will be focusing on <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr> or constraints that are mainly found in a manufacturing organisation.<\/li>\n\n\n\n<li>Resources such as material and labour are essential requirements in the production process and organisations make every effort to ensure that they can acquire sufficient of these resources.<\/li>\n\n\n\n<li>However, at times, it will not be possible to obtain all the resources due to the non-availability of the correct labour skill(s) and finite materials due to increased demand for it.<\/li>\n\n\n\n<li>You will be able to prepare computations using the <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing approach, to determine how to maximise contributions in light of the <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factor<\/abbr>(s).<\/li>\n<\/ul>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-3 kt-pane24364_57b2b2-eb\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong><abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>Limiting Factor<\/abbr> (Constraining Factor)<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In an organisation, there is at least one factor which limits its activities, for example, sales demand.<\/li>\n\n\n\n<li>If a company manufactures vehicles, say motor vans and the demand for them is 98,000, but the production capacity is 120,000, this means that the production department will be underutilised by the <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factor<\/abbr> of sales demand for vans.<\/li>\n\n\n\n<li>In a manufacturing organisation, the most common <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr> are resources such as materials and labour hours which can prevent it from producing products to its maximum capacity. \n<ul class=\"wp-block-list\">\n<li>Therefore, the production department manager would need to revise the planned production level of activities in order to accommodate the shortage of resources.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>In a situation where there is a shortage of a resource, the business should seek to maximise the use of the limited resource. \n<ul class=\"wp-block-list\">\n<li>To do this, they must apply the <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing method approach to determine the maximum contribution it can obtain from the mix of products it makes.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-10 kt-pane24364_deca01-7f\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>The <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing method <\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<ul class=\"wp-block-list\">\n<li>The <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> of an item is its variable <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr>. \n<ul class=\"wp-block-list\">\n<li>The <abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> production <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> of an item is the sum of its direct materials <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr>, direct labour <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr>, direct expenses <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> (if any) and variable production overhead <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr>. <\/li>\n\n\n\n<li>As the volume of production and sales increases total variable costs rise proportionately.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Fixed costs, in contrast are <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> that remain unchanged in a time period, regardless of the volume of production and sale.<\/li>\n\n\n\n<li><abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>Marginal<\/abbr> production <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> is the part of the <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> of one unit of production service which would be avoided if that unit were not produced, or which would increase if one extra unit were produced.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_7053ec50-d149-4a23-9b70-476f3f86d77a\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<ul class=\"wp-block-list\">\n<li><mark style=\"background-color:#ffab1f\" class=\"has-inline-color has-black-color\"><strong><abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>Marginal<\/abbr> costing<\/strong>&nbsp;is the <abbr class='c2c-text-hover' title='The process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.Accounting cycle (Chapter 12): The sequence in which data is recorded and processed until it becomes part of the financial statements at the end of the period.Accounting policies (Chapter 41): Those principles, bases, conventions, rules and practices applied by an entity that specify how the effects of transactions and other events are to be reflected in its financial statements.Accounts (or final accounts) (Chapter 16): This is a term previously used to refer to statements produced at the end of accounting periods, such as the income statement and the balance sheet. Nowadays, the term \u2018financial statements\u2019 is more commonly used.'>accounting<\/abbr> system in which variable costs are charged to <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> units and fixed costs of the period are written off in full against the <abbr class='c2c-text-hover' title='something formed by adding together several amounts or things.'>aggregate<\/abbr>&nbsp;<strong>contribution<\/strong>.<\/mark><\/li>\n\n\n\n<li><strong>Notes:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Variable costs are those which change as output changes &#8211; these are treated under&nbsp;<strong><abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing<\/strong>&nbsp;as costs of the product. <\/li>\n\n\n\n<li>Fixed costs, in this system, are treated as costs of the period.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>Marginal<\/abbr> costing<\/strong>&nbsp;is also the principal&nbsp;<strong>costing<\/strong>&nbsp;technique used in decision making. The key reason for this is that the<strong>&nbsp;<abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing<\/strong>&nbsp;approach allows management&#8217;s attention to be focussed on the changes which result from the decision under <abbr class='c2c-text-hover' title='Something of value to which a party is not already entitled, given to the party in exchange for contractual promises. Consideration can take various forms, including a Monetary payment, Promise to do something or Promise to refrain from doing something.'>consideration<\/abbr>.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"Fixed\/Variable\/Total Costs and the Marginal Cost of Production Defined &amp; Explained in One Minute\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/f640XIT7ZgA?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"Marginal Costing Explained | Dr. Anil Lamba\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/lCj0PUrUkWY?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-11 kt-pane24364_4ed070-b5\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>The contribution concept<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\"><style>.kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);background:var(--global-palette9, #ffffff);}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:bold;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:var(--global-palette7, #eeeeee);color:var(--global-palette4, #2D3748);background:#e0cf0d;}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:var(--global-palette7, #eeeeee);color:var(--global-palette3, #1A202C);background:var(--global-palette8, #F7FAFC);}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:var(--global-palette7, #eeeeee);color:#ffffff;background:#0a6689;}.wp-block-kadence-tabs .kt-tabs-id24364_c48cca-d3{max-width:2000px;}@media all and (max-width: 1024px){.kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id24364_c48cca-d3 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id24364_c48cca-d3 kt-tabs-has-3-tabs kt-active-tab-1 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-overview\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-overview\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\">Overview<\/span><\/a><\/li><li id=\"tab-examplequestion\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-examplequestion\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\">Example: Question<\/span><\/a><\/li><li id=\"tab-examplesolution\" class=\"kt-title-item kt-title-item-3 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-examplesolution\" data-tab=\"3\" class=\"kt-tab-title kt-tab-title-3 \"><span class=\"kt-title-text\">Example: Solution<\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab24364_b26c0c-98\"><div class=\"kt-tab-inner-content-inner\">\n<p class=\"wp-block-paragraph\">The&nbsp;<a href=\"https:\/\/kfknowledgebank.kaplan.co.uk\/management-accounting\/costing\/tac-v-mc\" data-type=\"link\" data-id=\"https:\/\/kfknowledgebank.kaplan.co.uk\/management-accounting\/costing\/tac-v-mc\"><strong>contribution<\/strong>&nbsp;concept<\/a> lies at the heart of&nbsp;<strong><abbr class='c2c-text-hover' title='(costing) is based on classifying costs by behaviour, in other words, whether a cost is variable or fixed.'>marginal<\/abbr> costing<\/strong>.&nbsp;<strong>Contribution<\/strong>&nbsp;can be calculated as follows.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><mark style=\"background-color:#ffab1f\" class=\"has-inline-color\">Contribution = Sales price &#8211; Variable costs<\/mark><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The idea of profit is not a particularly useful one as it depends on how many units are sold. For this reason, the&nbsp;<strong>contribution<\/strong>&nbsp;concept is frequently employed by management accountants.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Contribution<\/strong>&nbsp;gives an idea of how much &#8216;money&#8217; there is available to &#8216;contribute&#8217; towards paying for the <abbr class='c2c-text-hover' title='are business costs that are related to the day-to-day running of the business. Unlike operating expenses, overheads cannot be traced to a specific cost unit or business activity. Instead, they support the overall revenue-generating activities of the business. Fixed overheads are costs that remain constant every month and do not change with changes in business activity levels. Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets, and government licenses. Variable overheads are expenses that vary with business activity levels, and they can increase or decrease with different levels of business activity. During high levels of business activity, the expenses will increase, but with reduced business activities, the overheads will substantially decline or even be eliminated. Semi-variable overheads possess some of the characteristics of both fixed and variable costs. A business may incur such costs at any time, even though the exact cost will fluctuate depending on the business activity level. A semi-variable overhead may come with a base rate that the company must pay at any activity level, plus a variable cost that is determined by the level of usage. Examples of semi-variable overheads include sales commissions, vehicle usage, and some utilities such as power and water costs that have a fixed charge plus an additional cost based on the usage. Examples of variable overheads include shipping costs, office supplies, advertising and marketing costs, consultancy service charges, legal expenses, as well as maintenance and repair of equipment'>overheads<\/abbr> of the organisation.<\/li>\n\n\n\n<li>At varying levels of output and sales,&nbsp;<strong>contribution<\/strong>&nbsp;per unit is constant.<\/li>\n\n\n\n<li>At varying levels of output and sales, profit per unit varies.<\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ffab1f\" class=\"has-inline-color\">Total contribution = Contribution per unit x Sales volume.<\/mark><\/strong><\/li>\n\n\n\n<li><strong><mark style=\"background-color:#ffab1f\" class=\"has-inline-color\">Profit = Total contribution&nbsp;&#8211; Fixed <abbr class='c2c-text-hover' title='are business costs that are related to the day-to-day running of the business. Unlike operating expenses, overheads cannot be traced to a specific cost unit or business activity. Instead, they support the overall revenue-generating activities of the business. Fixed overheads are costs that remain constant every month and do not change with changes in business activity levels. Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets, and government licenses. Variable overheads are expenses that vary with business activity levels, and they can increase or decrease with different levels of business activity. During high levels of business activity, the expenses will increase, but with reduced business activities, the overheads will substantially decline or even be eliminated. Semi-variable overheads possess some of the characteristics of both fixed and variable costs. A business may incur such costs at any time, even though the exact cost will fluctuate depending on the business activity level. A semi-variable overhead may come with a base rate that the company must pay at any activity level, plus a variable cost that is determined by the level of usage. Examples of semi-variable overheads include sales commissions, vehicle usage, and some utilities such as power and water costs that have a fixed charge plus an additional cost based on the usage. Examples of variable overheads include shipping costs, office supplies, advertising and marketing costs, consultancy service charges, legal expenses, as well as maintenance and repair of equipment'>overheads<\/abbr><\/mark><\/strong><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab24364_d0da8d-1c\"><div class=\"kt-tab-inner-content-inner\">\n<p class=\"wp-block-paragraph\"><strong>Example:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">James Company manufactures a product that sells for \u00a360 per unit. The company incurs a variable <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> per unit of \u00a335 and \u00a32,400,000 in total fixed costs to produce this product. They are currently selling 100,000 units.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>REQUIREMENTS<\/strong>:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">a) What is the contribution margin per unit?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">b) Compute the profit<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-3 kt-inner-tab24364_1fb571-3a\"><div class=\"kt-tab-inner-content-inner\">\n<p class=\"wp-block-paragraph\">a) Contribution per unit &nbsp; = Selling price per unit \u2013 variable costs per unit<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;                             = 60 \u2013 35 = \u00a325 per unit<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">(b) Total contribution = contribution per unit x number of units sold<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; &nbsp;= \u00a325 x 100,000&nbsp; = &nbsp; \u00a32,500,000<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; Less: fixed costs&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp; (2,400,000)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; Profit &nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100,000&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Let&#8217;s go straight into doing some activities to demonstrate how to deal with resource shortages and how to maximise profit from the making of products.<\/p>\n<\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-12 kt-pane24364_f31e47-f2\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Task 1<\/strong> <\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\"><style>.kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);background:var(--global-palette9, #ffffff);}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:bold;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:var(--global-palette7, #eeeeee);color:var(--global-palette4, #2D3748);background:#e0cf0d;}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:var(--global-palette7, #eeeeee);color:var(--global-palette3, #1A202C);background:var(--global-palette8, #F7FAFC);}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:var(--global-palette7, #eeeeee);color:#ffffff;background:#0a6689;}.wp-block-kadence-tabs .kt-tabs-id24364_e8f4a1-58{max-width:2000px;}@media all and (max-width: 1024px){.kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id24364_e8f4a1-58 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id24364_e8f4a1-58 kt-tabs-has-2-tabs kt-active-tab-2 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-question\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-question\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\">Question<\/span><\/a><\/li><li id=\"tab-solution\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-solution\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\">Solution <\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab24364_6de6e7-1b\"><div class=\"kt-tab-inner-content-inner\">\n<p class=\"wp-block-paragraph\">Jane Company manufactures a product that sells for \u00a370 per unit. The company incurs a variable <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> per unit of \u00a330 and \u00a35,000,000 in total fixed costs to produce this product. They are currently selling 200,000 units.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Tasks:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">a) What is the contribution margin per unit?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">b) Compute the profit<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab24364_6959aa-fc\"><div class=\"kt-tab-inner-content-inner\">\n<p class=\"wp-block-paragraph\">a) Contribution per unit &nbsp; = Selling price per unit \u2013 variable costs per unit<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; = 70 \u2013 30 = \u00a340 per unit<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">(b) Total contribution = contribution per unit x number of units sold<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; &nbsp;= \u00a340 x 200,000&nbsp; = &nbsp; \u00a38,000,000<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; Less: fixed costs&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp; (5,000,000)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp; Profit &nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,000,000&nbsp;<\/p>\n<\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-4 kt-pane24364_958136-ee\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Activity 1 on <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>Limiting Factor<\/abbr><\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A manufacturing company makes two products, Gee and Heych, each utilising the same material and the same labour force.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The planned budget for the month of November is as follows.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/livecoventryac-my.sharepoint.com\/:x:\/g\/personal\/ad3624_coventry_ac_uk\/EbxgPM6TyiZOhK6CWpn_snkB-AHsciTcU4TWspdOlOBKeg?e=s4W0lp\">408AF-SESSION 19.xlsx<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The material costs \u00a38 per kilo and the labour force is paid on an hourly basis at \u00a35 per hour. Employees only work when there is work available and <abbr class='c2c-text-hover' title='are business costs that are related to the day-to-day running of the business. Unlike operating expenses, overheads cannot be traced to a specific cost unit or business activity. Instead, they support the overall revenue-generating activities of the business. Fixed overheads are costs that remain constant every month and do not change with changes in business activity levels. Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets, and government licenses. Variable overheads are expenses that vary with business activity levels, and they can increase or decrease with different levels of business activity. During high levels of business activity, the expenses will increase, but with reduced business activities, the overheads will substantially decline or even be eliminated. Semi-variable overheads possess some of the characteristics of both fixed and variable costs. A business may incur such costs at any time, even though the exact cost will fluctuate depending on the business activity level. A semi-variable overhead may come with a base rate that the company must pay at any activity level, plus a variable cost that is determined by the level of usage. Examples of semi-variable overheads include sales commissions, vehicle usage, and some utilities such as power and water costs that have a fixed charge plus an additional cost based on the usage. Examples of variable overheads include shipping costs, office supplies, advertising and marketing costs, consultancy service charges, legal expenses, as well as maintenance and repair of equipment'>overheads<\/abbr> are fixed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Product Gee sells for \u00a3180 per unit and Heych for \u00a3145 per unit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Due to the skill of labour required, the company is experiencing a shortage of employees and therefore labour hours expected for the month of November is only 8,500 hours.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Required<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Prepare a revised production budget in units for the month of November that maximises contribution and profit.<\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-9 kt-pane24364_a5fafc-33\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Quiz<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p class=\"wp-block-paragraph\">(check this, can&#8217;t find it)<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-opt-id=369156061  fetchpriority=\"high\" decoding=\"async\" width=\"937\" height=\"937\" src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:auto\/h:auto\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png\" alt=\"\" class=\"wp-image-25444\" srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:937\/h:937\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png 937w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:300\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:150\/h:150\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png 150w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:768\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:270\/h:270\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2023\/11\/image-41.png 270w\" sizes=\"(max-width: 847px) 100vw, 847px\" \/><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_a8107977-d1d7-4248-96dd-35245e097571\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.menti.com\/alk2uqxp6h48\">https:\/\/www.menti.com\/alk2uqxp6h48<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-8 kt-pane24364_8ba758-d1\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Summary<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p class=\"wp-block-paragraph\">In this session, you have covered constraints or <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr> such as shortage of material and labour that affect how many products an organisation can make and, at the same time, maximising contribution to cover fixed costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These are not the only <abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>limiting factors<\/abbr>; you could have limitations in machine hours, factory space and even warehouse capacity to store finished products.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The importance of knowing how to maximise profit as a management accountant in an organisation is helpful to the decision-making process of the board of directors of the organisation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Make sure that you are able to master the techniques used in the solution to enable you to use it and apply it in assignments and employment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the next session, you will move on to Flexi budgeting.<\/p>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p><abbr class='c2c-text-hover' title='are shortages of resources that limit the activities of an organisation.'>Limiting Factors<\/abbr> in <abbr class='c2c-text-hover' title='Financial and non-financial expressions of the objectives of departments or functions in an organisation.'>Budgets<\/abbr><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_header_footer","format":"standard","meta":{"_eb_attr":"","_uag_custom_page_level_css":"","footnotes":""},"categories":[48,1],"tags":[],"class_list":["post-24364","post","type-post","status-publish","format-standard","hentry","category-408af","category-uncategorised"],"featured_image_src":null,"author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"education-hub-thumb":false},"uagb_author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_comment_info":0,"uagb_excerpt":"Limiting Factors in Budgets","_links":{"self":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/24364","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=24364"}],"version-history":[{"count":57,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/24364\/revisions"}],"predecessor-version":[{"id":38236,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/24364\/revisions\/38236"}],"wp:attachment":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=24364"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=24364"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=24364"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}