Browse MBAs SECTION 2: Managerial & Cost Accounting

The Constraint & Capacity Analyzer

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The Constraint & Capacity Analyzer

Find the bottleneck in this operation and tell me how to make the most of
it.

The process/operation: [DESCRIBE THE STEPS AND CAPACITIES]
Products competing for the constraint: [PRICE, VARIABLE COST, CONSTRAINT
USAGE PER UNIT]
Demand: [BY PRODUCT]

Apply the logic of constraints:
1. Identify the bottleneck resource
2. Rank products by contribution margin per unit of the constraint (not
   per unit of product)
3. The optimal product mix given the constraint and demand
4. The profit gain from that mix vs the current one
5. What a unit of extra bottleneck capacity is worth, and options to get
   it

Show why margin-per-constraint beats margin-per-unit when capacity is
tight.

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