Comments

  1. avatar says

    Hi Sir,

    About shadow pricing, How the extra contribution is regarded wholly to the cost? If the contribution is in whole becoming the cost, there is no point to stretch the additional constraint. Because the benefit all becomes the cost.

    • Avatar of John Moffat says

      What you say is true.
      That is why the shadow price is the most extra we are prepared to pay for one extra unit of the limited resource.
      So…..provided we can get it for less then it is worth having (because the total contribution will increase).

    • Avatar of John Moffat says

      I did it for both labour and for material. However, since material is not a binding constraint the shadow price is obviously zero.

      In the exam you will be told which resources to calculate the shadow prices for.

    • Avatar of John Moffat says

      You identify it by moving out the contribution line (keeping it parallel) as far as you can from the origin, without leaving the feasible region.

      (If you want me to answer questions, then please ask in the F5 Ask the ACCA Tutor Forum – it is not possible for me to always read all the comments beneath lectures :-) )

  2. Avatar of John Moffat says

    There is no specific rule about how many decimal places (unless, obviously, the question specifies).
    Generally keep to two decimal places. It doesn’t matter if it impacts a later answer – the marks are for the workings, not for the final answer.

    (If you want me to answer a question, then please post it in the Ask the ACC Tutor forum – I cannot always read every comment under the lectures).

  3. avatar says

    hi prof moffat,
    i am practising the questions and got a problem. for those equations don’t give an integer, how many decimals shall we keep? i saw the exam bank kept two, but is it mandatory?since the value will impact the further calculation for the contribution and also shadow price. thank you very much for a clarification and thx for the great lectures as well!

    Xiaowen

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