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Hello Sir.
Sir my question is w.r.t past year question of Higgins Co. Which deals with Linear Programming.
The Requirement (d) of the question asks to “Advise whether to accept the craftsmen’s initial offer of working overtime, discussing the rate of pay requested, the quantity of hours and one other factor that HC should consider”
In this requirement I’m unable to explain the offer acceptance from the point of maximum quantity of hours that should be accepted.
I know that shadow price is valid to only a limited additional units of binding constraint as in case more and more units are available of the current binding constraint it would eventually cease to be a binding constraint while some other constraint (which was originally non binding) would become a binding constraint.
However sir how to decide the maximum additional hours to accept so that craftsmen’s hours remains a binding constraint.
Please tell me the date of the exam in which this question appeared.
(I do have all past exam questions, but I cannot remember the name of every question and which exam they appeared in 🙂 )
As the available number of labour hours increases, the labour (craftsmen) line keeps moving further away from the origin, and so although point D is still the optimum, it keeps moving further away. However as the craftsmen line moves away from the origin there comes a time when it gets to point F where Ash and Max S become the limiting factors. Any more labour then is irrelevant. So point F becomes the new optimum and it is the amount of labour that is used at point F that is the most that it is worth paying for.
Thankyou Sir
Sir 2 more things that i wanted to ask was
1) Why Shadow Price is also called Dual Price is there any specific reason behind that?
2) Sir I’m unable to decide on which scenario shall i use the key factor analysis (i.e.Ranking the products based upon Contribution per unit of Limited Resources and then allocating the
units resource acting as constraint).And on which question shall i use Linear Programming when 2 products have been provided in the question.
1. No particular reason, and irrelevant.
2. If there is more than one constraint then it is linear programming. If only one constraint it is key factor analysis (unless the question specifies throughput accounting).
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