Nar Limited manufactures a range of cable products for the electronics industry. The company has been notified of an upcoming scarce availability situation in relation to a raw material called Rhond, a metal used in the production of three of the companys cable products. The maximum availability of this material will be restricted to 15,000 metres in the upcoming quarter. You have been asked by the production manager to make appropriate changes to the production budget for these three cable products and have received the following resource usage information for each product:

1. Each type of cable is produced in standard lengths as indicated in the above table. It is not possible to produce any other roll length due to the need to comply with industry standards. 2. Each production roll of cable requires a length of Rhond which includes a waste allowance. The amount wasted is sold for scrap and cannot be used to make up other rolls. Rhond costs RM20 per metre and plastic costs RM10 per kilo. (Scrap proceeds can be ignored for the purposes of this question). 3. Labour is charged at a rate of RM13 per hour. 4. Machine time is charged at a rate of RM30 per hour.

The company is contractually obliged to supply 1,500 metres of each type of cable to a key customer in the forthcoming quarter. This contract cannot be broken despite the shortage of Rhondium and must be given top priority ahead of other sales orders. The maximum anticipated demand for each type of cable in the forthcoming quarter (including the 1,500 metres of each type of cable detailed in the previous note) is as follows:

Required: a) Briefly outline the meaning of the term limiting factor and explain how an organisation constrained by limiting factors should determine optimal production levels. b) Compute the optimal production levels of each type of cable for the upcoming quarter and the closing quantity of Rhond remaining in stock (if any) at the end of the quarter.

Note Cable X 300 metres Cable Y 250 metres Cable Z 500 metres Length of 1 production roll Resources required to make 1 roll VARIABLE COST ITEMS Materials Rhond Plastic Labour time 2 2 3 315 metres 6 kilos 12 hours 260 metres 5 kilos 12 hours 505 metres 12 kilos 36 hours FIXED COST ITEMS Machine time 4 24 hours 24 hours 36 hours Additional information: The sales prices of 1 production roll of the different types of cable are as follows: Cable X Cable Y Cable Z RM RM RM Sales price per production roll 12,186 10,216 15,738 Customer demand Cable X 6,600 metres Cable Y 3,500 metres Cable z 4,500 metres