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limiting factor and shadow price

Ssamah2y ago
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 What is the shadow price of these materials, if material were limited to 2,000 kgs per week? . i didn't get , the shadow price measure of how much they would be willing to pay to gain more of a scarce resource over and above the normal price shouldn't we add one extra KG to 2000 then i make equations and solve to get the quantity of Qutwo the the subtract it from the old quantity?
IAW3005IAW3005Tutor2y ago#1
Where is the question from? Kaplan, BPP or ACCA
IAW3005IAW3005Tutor2y ago#2
I think it’s Kaplan Quone is using $6/$2 = 3 kg of the material. Qutwo is using $5/$2 = 2.5 kg of the material. Therefore Quone is generating a contribution of $8/3 = $2.67 per kg, and Qutwo is generating a contribution of $8.50/2.5 = $3.4 per kg. Therefore currently they will use all of the material making Qutwo. If they get 1 more kg of the material then they will use it to make more Qutwo’s (because it has the higher contribution per kg.). As a result the contribution will increase by $3.40 and this is therefore the shadow price of the material If you are still unsure - Watch the lecture on linear programming which is where we explain what is meant by the shadow price
IAW3005IAW3005Tutor2y ago#3
https://opentuition.com/acca/pm/linear-programming-spare-capacity-and-shadow-prices-acca-performance-management-pm/
AAnjali1y ago#4
can u pls provide me with the question number of this question?
IAW3005IAW3005Tutor1y ago#5
Look for it in any Exam Kit Q plc. Makes two products – Quone and Qutwo from the same raw materials. I am afraid I am away at present but will check upon my return
IAW3005IAW3005Tutor1y ago#6
I would advise you to spend time looking at the examiner’s reports, look at questions, look at feedback, common mistakes etc I think will really help you Samah
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