
Discuss Key Factor Analysis within the Financial Management ( FM ) forums, part of the Resolve Your Query  Get Help and discuss Projects category; MARGINAL COSTING KEY FACTOR ANALYSIS PRODUCT MIX OPTIMISATION Definition : A key factor is defined as the factor in activities ...
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Key Factor Analysis 
Key Factor Analysis 
September 8th, 2010
MARGINAL COSTING KEY FACTOR ANALYSIS PRODUCT MIX OPTIMISATION Definition : A key factor is defined as the factor in activities of an undertaking which, at a particular point of time or over a period, will limit the volume of output. Purpose Of Key Factor Analysis Key Factor Analysis is governed by both Internal And External Factors i.e. Actual And Potential. It helps in calculating the profitability for the product. Profitability = Contribution Key Factor Examples Of Key Factors Sales Materials Labour Financial Resources Management Steps For Key Factor Analysis First identify the Limiting Factor(s). Calculate the volume of resources required to produce enough units to satisfy sales demand. Calculate the volume of resources available. Compare the two totals. If (1) exceeds (2) there is a Limiting Factor. Situations For Analysis Key Factor Analysis is done under 2 situations: When there is only one limiting factor. When there are more than one factors. Key Factor Control Increasing Labour Supply. Extending Production Capacity. Increasing Warehousing Capacity. Increasing the Finance or Reducing the Need for Finance. Rhine autos SOLUTION: Is Profit Maximization the only thing that a company looks in for ? PRODUCT MIX OPTIMISATION Product Mix Optimization Definition: Product Mix Optimization means selecting such a combination of the products for production which will give maximum profit to the organization. Determinants Of Product Mix Optimization Utilizing resources in their most efficient and productive manner. Providing favorable cash flows. Satisfying "attractiveness" constraints of buyers. Maximizing profits in the short and long run. Satisfying current demand trends and preventing oversupply situation. Objective Of Product Mix Optimization To Maximize Contribution. To cope up with Demand, Material and Capacity constraints. To know whether the product is competitive in terms of price and quality. Which combination of products will give company highest profits. Steps for determining Optimal Product Mix Analyzing Demand Trends. Cost of Production Analysis. Developing a linear programming analysis. ILLUSTRATION: AMBIKA CONDIMENTS BRING 2 PRODUCTS SUCHI AND RUCHI. MANAGEMENT HAS THE OPTION TO ALTER THE PRODUCTMIX OF THE 2 PRODUCT FORM OUT OF FOLLOWING OPTIONS: MARGINAL COST STATEMENT OF TWO PRODUCTS: OPTION IV GIVES HIGHEST PROFIT SO IV PRODUCT MIX IS RECOMMENDED. Advertisements  
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