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Dear Mr John Moffat
Thank you for all the free lectures. I have always relied on open tuition lecture notes and past exam question. Helps me a lot.Truly could have not passed a single paper without your brilliant lectures. In the examination hall sometimes I feel that as if I can hear your voice in my head. Glad to have a marvelous tutor like you.Now I am stuck with iso contribution concept. I have replayed the Iso contribution part several times still confused. F5 Lecture notes chapter 7 example 1 explains how to calculate contribution in a simple way. I got that. But past exam answers used the concept iso contribution to calculate contribution . My question is why do we need iso contribution? how will I know which figure to take? can I guess or take any figures?
I would really appreciate if you kindly explain the concept of iso contribution and it’s application .
Thank you
Hi, and thank you for your comments 🙂
I am assuming from what you have written, that you are help with drawing the constraints on the graph, and that the optimum solution cannot be outside the feasible area/region.
However, as to which combination of chairs gives the highest total contribution depends on the contribution per chair. For example, if standard chairs were giving a contribution of $100 each, and executive were giving $1 each, I think you would agree that we would almost certainly make only standard chairs (and the optimum point would be at point A in my answer. Similarly, if standard only gave $1 and executive gave $100, then we would make as many executive as we could and the optimum would be at point C.
So…..the way we check is to draw the iso-contribution line. Whatever the total contribution ends up being (whether it be $10 or $100 or $1000 or whatever) the angle of the line of the combinations of S and E giving that contribution will be the same.
So we choose any contribution – a guess, it does not matter what – and draw the line, so then we know the angle of it. Once we have the line, we move it as far away from the origin as we can (keeping parallel, so the same angle) without leaving the feasible region. Then we can find which the best corner is and then we have the optimal solution.I hope that helps 🙂
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