Accounting › Section W · Short-term decision making › Topic W.6
Decisions under constrained resources
When there are more orders than machine hours, the product with the biggest margin per unit is not necessarily the one to make first. What counts is how much each product earns from every hour of the resource that is running out.
In this topic
- When a resource runs out
- Why margin per unit can mislead
- The rule: margin per unit of the constraint
- Worked example: ranking at Kittering Joinery
- Worked example: building the production plan
- What an extra hour is worth
- Relaxing the constraint
- Qualitative factors and limits
- Common mistakes to avoid
- Key takeaways
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