Single limiting Factor Profit Maximization

Single limiting Factor Profit Maximization

Single limiting factor means there is only one constraint. Profit can be maximized with single limiting factor by maximizing the total contribution. Maximization of contribution involves three steps.

1.    Maximizing Contribution

Maximum contribution may be attained by achieving maximum contribution from the use of scarce resources i.e. utilization of resources in a way that those resource would provide maximum contribution.

2.    Priority Ranking

Product should be ranked to attain maximum contribution from the scarce resource. The ranking should be done on the bases of contributing earned by product in relation to scarce source i.e. contribution/scarce source.

3.    Production on bases of ranking

Organization should product the product on the bases of priority ranking. It means the product has fist ranking should be produced first, and if scarce resource are still available then 2^nd product should be produced. Production will go on unless all scarce resources are utilized.