Limiting Factor Quiz Questions And Answers

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  • 1/14 Questions

    The usual objective in questions is to maximise profit. Given that fixed costs are unaffected by the production decision in the short run, the approach should be to maximise the ____________ earned.

    • Conflict
    • Contribution
    • Limited
    • None of the above
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About This Quiz

A limiting factor is any factor that restricts a company or an organization's activities. Play this quiz on limiting factors containing questions and answers. Firms can be faced with deficits resulting from drawbacks in the planning process and other factors affecting the business. For this reason, an accountant should be able to plan with minimum factors. Test your understanding of the topic by playing this quiz. The quiz will also provide you with valuable information. All the best!

Limiting Factor Quiz Questions And Answers - Quiz

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  • 2. 

    Firms face many constraints on their activity and plan accordingly: - ________ demand - ________ skilled labor and other production resources - ________ finance (‘capital rationing’).

    • Limited

    • Unlimited

    • Loan

    • None of the above

    Correct Answer
    A. Limited
    Explanation
    Firms face constraints on their activity and must plan accordingly. One constraint they face is limited demand, meaning that there is a finite amount of demand for their products or services. This limited demand can affect their production and sales strategies. Another constraint is the availability of skilled labor and other production resources. If there is a limited supply of skilled labor or other necessary resources, it can impact the firm's ability to meet demand. Lastly, firms may also face constraints on finance, known as "capital rationing." This means that they have limited access to funding or investment capital, which can limit their ability to expand or invest in new projects.

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  • 3. 

    Where there are two or more resources in short supply which limit the organization’s activities then ______ ____________ is required to find the solution.

    • Linear programming

    • Exponential programming

    • Progressive programming

    • None of the above

    Correct Answer
    A. Linear programming
    Explanation
    Linear programming is a mathematical method used to find the best possible outcome in a given situation where there are multiple constraints and limited resources. It helps in optimizing the allocation of resources to maximize the desired objective. In this case, where there are two or more resources in short supply, linear programming can be used to determine the most efficient allocation of these resources to find a solution that best meets the organization's objectives. Exponential programming and progressive programming are not relevant in this context.

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  • 4. 

    If more of the critical constraint is obtained, the constraint line will move outwards altering the shape of the ________ region. After a certain point there will be little point in buying more of the scarce resource since any non-critical constraints will become critical.

    • Feasible

    • Non feasible

    • Reachable

    • None of the above

    Correct Answer
    A. Feasible
    Explanation
    If more of the critical constraint is obtained, the constraint line will move outwards altering the shape of the feasible region. After a certain point there will be little point in buying more of the scarce resource since any non-critical constraints will become critical. This means that the feasible region will shrink and any points outside of it will no longer be feasible. Therefore, the correct answer is "feasible".

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  • 5. 

    Limiting factor analysis - Assumptions: There is a single quantifiable objective – e.g. maximise contribution. In reality there may be multiple objectives such as maximising return while simultaneously minimising risk.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The explanation for the given correct answer is that limiting factor analysis assumes that there is a single quantifiable objective, such as maximizing contribution. This means that the analysis focuses on identifying and optimizing the factor that limits the achievement of this objective. However, in reality, there may be multiple objectives, such as maximizing return while simultaneously minimizing risk. Therefore, the assumption of a single quantifiable objective may not hold true in all situations.

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  • 6. 

    Non-critical constraints will have _____ shadow prices as slack exists already

    • 0

    • 2

    • 4

    • 6

    Correct Answer
    A. 0
    Explanation
    Non-critical constraints will have a shadow price of 0 because these constraints already have slack, meaning that they are not binding in the optimal solution. Shadow prices represent the change in the objective function value for a unit increase in the right-hand side of a constraint. Since non-critical constraints have slack, they can be relaxed without affecting the optimal solution, and therefore their shadow prices are 0.

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  • 7. 

    Limiting factor analysis - Assumptions: Each product always uses the same quantity of the scarce resource per unit. In reality this may not be the case.  For example, learning effects may be enjoyed.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The explanation for the correct answer, which is True, is that the assumption made in limiting factor analysis is that each product always uses the same quantity of the scarce resource per unit. However, in reality, this may not be the case as there could be learning effects that allow for more efficient use of the resource over time. Therefore, the statement is true as it acknowledges that the assumption may not always hold true in real-world scenarios.

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  • 8. 

    Limiting factor analysis- Assumptions: The scenario is long term. This allows us to ignore fixed costs. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The scenario is short term. This allows us to ignore fixed costs.

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  • 9. 

    Shadow price should be considered carefully. For example, the shadow price of labor may be calculated as $20 per hour. However, it may be possible to negotiate a _____ shadow price than this.

    • Lower

    • Higher

    • Constant

    • None of the above

    Correct Answer
    A. Lower
    Explanation
    The explanation for the given correct answer is that even though the shadow price of labor is calculated as $20 per hour, it is still possible to negotiate a lower shadow price than this. This means that the actual cost of labor can be negotiated to be lower than the calculated shadow price, allowing for potential cost savings in the labor aspect of the project.

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  • 10. 

    If there is one limiting factor, then the problem is best solved using ___ ______ analysis

    • Key factor

    • Prime factor

    • Cost factor

    • Demand factor

    Correct Answer
    A. Key factor
    Explanation
    The given question states that if there is one limiting factor, the problem is best solved using "key factor" analysis. This suggests that when there is a single factor that is restricting or limiting the problem, it is most effective to analyze and focus on that specific factor. This approach allows for a targeted and efficient solution to be developed, addressing the key factor that is causing the limitation.

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  • 11. 

    Limiting factor analysis - Assumptions: Products are not independent – in reality  - customers may expect to buy both products together  - the products may be manufactured jointly together.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Products are independent – in reality: – customers may expect to buy both products together – the products may be manufactured jointly together.

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  • 12. 

    Limiting factor analysis - Assumptions: The contribution per unit is variable. In reality this may not be the case: - the selling price may have to be increased to sell more - there may be economies of scale, for example a discount for buying in bulk

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The contribution per unit is constant. In reality this may not be the case:

    – the selling price may have to be lowered to sell more
    – there may be economies of scale, for example a discount for buying in bulk.

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  • 13. 

    Linear programming is used to:

    • Maximise contribution

    • Minimise costs

    • Minimise contribution

    • Maximise costs

    Correct Answer(s)
    A. Maximise contribution
    A. Minimise costs
    Explanation
    Linear programming is a mathematical technique used to optimize a given objective function within a set of constraints. In this case, the objective is to maximize contribution and minimize costs. Maximizing contribution means finding the optimal allocation of resources to generate the highest possible profit or benefit. On the other hand, minimizing costs aims to find the most cost-effective solution by reducing expenses. Therefore, both maximizing contribution and minimizing costs are valid applications of linear programming.

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  • 14. 

    _____ is the amount by which a resource is underutilized. It will occur when the optimum point does not fall on a given resource line. _____ is important because unused resources can be put to another use, e.g. hired out to another manufacturer

    • Piece

    • Slack

    • Both 1 and 2

    • Neither 1 nor 2

    Correct Answer
    A. Piece
    Explanation
    The term "slack" refers to the amount by which a resource is underutilized. It occurs when the optimum point does not fall on a given resource line. Slack is important because unused resources can be put to another use, such as being hired out to another manufacturer. Therefore, the correct answer is "slack."

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  • Sep 04, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 05, 2011
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    SarBobBear
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