Limiting factor

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Cost and management accounting.

A limiting factor is an input resource which is scarce.

Also known as a scarce resource or key factor.

In different simple situations the most important limiting factor may be skilled labour, a physical resource, time, or something else.

In practice there may well be multiple limiting factors.

In a simple case with a single limiting factor, total contribution and total profit are maximised by focusing on the production that produces the greatest contribution per unit of the limiting factor.

See also