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February 5, 2020 at 3:02 pm
Please correct me if my explanation is wrong. To answer the question, we have to very be careful with the question asked especially the word is tricky. If the question asked about the Shadow Price, then the answer should be $3.70, the most extra = above the current price ( the different of old – new contribution) – ignore the current material price. But here the question asked about the most payment that the company prepared to pay for one extra material meaning, shadow price + current material price for one extra material ($3 + $3.70) = $6.70. Am I right? I have watched your lecture, a bit confused.
February 13, 2020 at 12:35 pm
No reply from John? Can someone help?
John Moffat says
February 13, 2020 at 3:47 pm
I do not see all comments on lectures – only the latest ones. In future you should ask in the Ask the Tutor Forum – I always see all questions there, and I always reply within 24 hours 🙂
You are correct, but I am surprised you had to ask because if you review the test after submitting your answers then you see the correct answer and the explanation 🙂
October 14, 2019 at 7:00 pm
This is how i solve this: Shadow price: New Max. Contribution (MC1)-Original Marginal Contribution (MC0) Hence, ShP= $3.70 MC1=? MCo=3 Hence, MC1=$3.70+$3.0 =$6.70
August 1, 2019 at 9:40 am
anyone to share the solution to this question thank you.
November 5, 2018 at 2:31 pm
Thanks for this question. The most extra to pay for Material Z is the normal material cost plus the shadow price
May 24, 2017 at 4:30 pm
But asking what the most extra u are willing to pay sounds like the extra on the current price of kilo. Which is jus the 3.70 Unless u have to look for key words like the most extra per kg and the most extra on a kilo.
How do we know when they would ask for the shadow price alone? Would it jus be a straightforward quest. What is the shadow price?
May 24, 2017 at 4:36 pm
You must watch my free lectures on this (there is no point in attempting the tests without studying first 🙂 )
I explain the definition of the shadow price in my lectures – it is the most extra (above the current cost) that we are prepared to pay for one extra unit of a limited resource.
Do watch the lectures – they are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well. You will only pass the exam by studying the entire syllabus (either by watching my lectures or by buying a Study Text from one of the ACCA approved publishers and studying from that), and by buying a Revision Kit from one of the ACCA approved publishers and practicing every questions (and learning from your mistakes).
May 24, 2017 at 5:46 pm
I did watch all the videos sir But my confusion was on the term *most extra*. Sounds like it’s speaking only about the extra cost paying to acquire 1 additional kilo and not the total cost to in acquiring the kilo
January 26, 2020 at 6:45 pm
In my humble opinion, you need to look for either “what is the MOST (per kg) the company is willing to pay” – as in the question above – or “what is the MOST EXTRA (per kg) the company is willing to pay” – this time, this was not the question. Had the latter term been in the question, that would have meant the shadow price per kg that is on top of the current/usual price. What might have confused you is the word “extra” in the question, however, that refers to the material (not the price itself).
Hope this helps. Regards
May 24, 2017 at 6:14 pm
Sir can u please try shed some light on the query I have on minimax regret. I would be grateful if u can make some clarifications
April 14, 2017 at 12:38 pm
why is there only one MCQ ? 🙁
April 14, 2017 at 3:25 pm
Maybe I will add more later 🙂
Anyway, you will have plenty of questions in your Revision Kit (and obviously you must buy a Revision Kit from one of the ACCA approved publishers).
May 31, 2020 at 7:15 pm
Does it mean open tuition lectures and note alone is not sufficient to cover the whole syllabus and get a pass?
May 31, 2020 at 7:36 pm
I think this is the answer to my question. (Do watch the lectures – they are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well. You will only pass the exam by studying the entire syllabus (either by watching my lectures or by buying a Study Text from one of the ACCA approved publishers and studying from that), and by buying a Revision Kit from one of the ACCA approved publishers and practicing every questions (and learning from your mistakes).
June 1, 2020 at 9:55 am
Yes. The lectures cover everything needed. The Revision Kit is full of questions for practice and practice at exam standard questions is vital.
March 5, 2017 at 6:35 am
Sir, I have one question. In my exam kit there is a problem, where they give detailed explanation that the shadow price already includes material cost, so we shouldn’t add it for arriving at most to pay for limited resource. And also, there is an exercise with shadow price being equal to contribution… I am now confused and before I already tried to get it but it is still not clear to me… I listened to your lectures several times. Please, be so kind to clear this up for me. I must miss something but can’t define what exactly. Thank you so much.
March 5, 2017 at 9:06 am
The shadow price is calculated by finding the extra contribution generated by having one extra unit of the limited resource – I explain this in the lecture. With regard to the question in your revision kit, I cannot help without seeing the question. If it is in the BPP Revision Kit then tell me the number of the question. (But tell me in the Ask the Tutor Forum – not here!)
January 28, 2017 at 4:18 pm
is the shadow price is the most extra cost for 1 extra unit or the difference between old and new contribution? confused..
February 9, 2017 at 4:11 am
I believe it is both. The difference between the new and old contribution is the most extra cost you’re willing to pay for one more kg/hr/unit (depending on the resource) of limited resource you are willing to pay since you’re going to get that extra contribution
February 9, 2017 at 6:07 am
Rachels explanation is completely correct 🙂
August 7, 2016 at 9:04 am
Sorry. It’s about two products X and Y using the same material at $3, and 5 kg each. Shadow price is 3. 75. So, increase in contribution 3. 75 and most to pay 6. 75?
August 7, 2016 at 3:43 pm
Yes – the most to pay is 6.75.
You have obviously not watched the lectures (and there is not much point in attempting the tests without watching the lectures first).
November 25, 2016 at 6:51 pm
Question gave you the shadow price which is the increase in cost if material increased therefore the company has to pay the shadow price in addition to the current cost!
November 26, 2016 at 10:14 am
Yes – the shadow cost is the most extra we are prepared to pay, over and above the current cost.
August 7, 2016 at 3:11 am
Sorry, maximum increase in contribution.
August 7, 2016 at 3:08 am
Sir, in this example if they asked what will the max. contribution be, the right answer would be 3. 70? I have similar question in Kit.
August 7, 2016 at 8:25 am
You will have to say which example!!
July 17, 2016 at 11:04 am
hehe,it was one quiz and i got it wrong,i have to through the last lecture again.
July 17, 2016 at 2:57 pm
If you are then not clear why you were wrong, then do ask 🙂
December 3, 2015 at 3:39 pm
i got it now after reading the question again.it says what is the most per kg the company should be prepared to pay not what is the most extra. thanks
December 2, 2015 at 8:34 pm
please, why the answer is not 3.7 please explain further
December 3, 2015 at 7:05 am
Because (as the pop up workings explain) the shadow cost is the most extra we are prepared to pay, over and above the normal price. I do suggest that you watch the free lectures on linear programming where this is explained.
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