How Do You Answer Limiting Factor Questions in ACCA PM?
Limiting factor questions in ACCA PM test how to maximise contribution when a resource is scarce. Here's how to rank products and structure your answer.
Limiting factor analysis in ACCA PM tackles a common problem: how to make the best use of a scarce resource — labour hours, machine time or materials — to maximise profit. The guiding principle is to maximise contribution per unit of the limiting factor, not contribution per unit of product. Getting that distinction right is where the marks are.
The single limiting factor approach
- Identify the limiting factor (the scarce resource that constrains output).
- Calculate the contribution per unit for each product.
- Divide by the amount of the scarce resource each product uses, to get contribution per unit of limiting factor.
- Rank the products by that figure and allocate the scarce resource in ranking order.
When there's more than one constraint
With two or more binding constraints, ranking no longer works and you move to linear programming — formulating the objective function and constraints, plotting the feasible region and finding the optimal point. PM can test the formulation, the graph and the interpretation, including shadow prices.
Common pitfalls
- Ranking by contribution per unit of product instead of per unit of scarce resource.
- Forgetting to satisfy any minimum demand or contractual quantities first.
- Misreading which resource is actually the binding constraint.
Practising full limiting-factor and linear-programming questions and marking them against the official ACCA scheme with The 50% Club shows you exactly where your ranking or formulation loses marks — the fastest way to make these reliable points.