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A company manufactures two products, x and y, using the same type of direct labour. Production capacity per period is restricted to 60000 direct labour hours. The contribution per unit is 8 for product x and 6 for product y. The following constraints apply to production and sales.
x < or equal to 10000 (sales demand for product x)
y < or equal to 12000 (sales demand for product y)
5x + 4y < or equal to 60000 (direct labour hours)
The contribution maximising output is to manufacture and sell 10000 units of product x and 2500 units of product y.
What is the shadow price per direct labour hour and for how many additional hours of labour does this shadow price per hour apply?
How to calculate the shadow price when only direct labour constraint is given and no material constraint is given. Also how to calculate for how many additional hours of labour does this shadow price per hour apply and what does it mean.Why should there be a material constraint?
The three constraints given are clearly the only constraints and there is therefore no limit on the material available.
For the calculation and understanding of the shadow cost you need to watch my free lectures on linear programming.
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