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‘I remember being told about the useful decision¬ making technique of limiting factor analysis (also known as “contribution per unit of the key factor”). If an organisation is prepared to believe that, in the short run, all costs other than direct materials are fixed costs, is this not the same thing that throughput accounting is talking about? Why rename limiting factor analysis as throughput accounting?’

Requirements:

(a) Explain what a limiting (or ‘key’) factor is and what sort of things can become limiting factors in a business situation. Which of the factors in the scenario could become a limit¬ ing factor? (8 marks)

(b) Explain the techniques that have been devel¬

oped to assist in business decision-making when single or multiple limiting factors are encountered. (7 marks)

(c) Explain the management idea known as throughput accounting. State and justify your opinion on whether or not throughput accounting and limiting factor analysis are the same thing. Briefly comment on whether throughput accounting is likely to be of rel¬ evance to SEL.