Factors that Limit Capacity
We have made the point that managers often attempt to maximize the contribution margin per unit of a particular resource that limits output capacity. The following business is familiar and we will use it
– As an employee, write an internal memo to your manager addressing the following:
- For this business, identify the factor that you believe is most likely to limit potential output capacity.
- Suggest several ways (other than raising prices) the business can maximize the contribution margin per unit of this limiting resource. (Hint: These businesses often do implement the types of strategies you are likely to suggest. Thus, your solution to this case may explain basic characteristics of businesses that you personally have observed.)
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