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A company makes two products, X and Y.
Both products use material Z which is in limited supply, and current production levels are using the entire weekly supply .
Product X uses 5kg of Z per unit; Product Y uses 5kg of Z per unit.
Material Z is costing currently $3 per kg, and the shadow price for Material Z has been calculated as $3.7 per kg.
The supplier of material Z is prepared to increase the weekly supply by 10kg.
what is the most per kg that the company should be prepared to pay for the extra material ?
The answer is $6.7.
But I don’t know understand this question at all and how did they get this answer ? please can you let know the working and why ? I have watched the lecture but in the lecture , it didn’t mention about this one .
Thanks
Sherry