KEY FACTOR ANALYSIS
Definition :-
A key factor is defined as the factor in activities of an undertaking which, at a particular point of time or over a period, will limit the volume of output.
Purpose Of Key Factor Analysis
Key Factor Analysis is governed by both Internal And External Factors i.e. Actual And Potential.
It helps in calculating the profitability for the product.
Profitability = Contribution/Key Factor
Examples Of Key Factors
Sales
Materials
Labour
Financial Resources
Management
Steps For Key Factor Analysis
First identify the Limiting Factor(s).
Calculate the volume of resources required to produce enough units to satisfy sales demand.
Calculate the volume of resources available.
Compare the two totals.
If (1) exceeds (2) there is a Limiting Factor.
Situations For Analysis
Key Factor Analysis is done under 2 situations:-
When there is only one limiting factor.
When there are more than one factors.
Key Factor Control
Increasing Labour Supply.
Extending Production Capacity.
Increasing Warehousing Capacity.
Increasing the Finance or Reducing the Need for Finance.
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