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Q plc makes two products – Quone and Qutwo – from the same raw material. The selling
price and cost details of these products are as shown below:
Quone Qutwo
$ $
Selling price 20.00 18.00
––––– –––––
Direct material ($2.00 per kg) 6.00 5.00
Direct labour 4.00 3.00
Variable overhead 2.00 1.50
––––– –––––
12.00 9.50
––––– –––––
Contribution per unit 8.00 8.50
The maximum demand for these products is 500 units per week for Quone, and an
unlimited number of units per week for Qutwo.
The shadow price of these materials is pick from list, if material were limited to 2,000 kgs
per week?
List options are:
$nil
$2.00 per kg
$2.66 per kg
$3.40 per kg….The answer is $3.4 per kg …
They did 8.5/2.5kg=3.4$ ……
I didn’t understand how did they get 2.5kg???plz explainThe material is costing $2.00 per kg.
The materials used in Qutwo are costing $5.00 per unit.
Therefore Qutwo must be using $5/$2 = 2.5 kgs.per unit
(Similarly, Quone must be using $6/$2 = 3 kgs per unit.)
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