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Hi Dear Tutor, I have a question.
—————————————-Quone—————————————–Qutwo
Selling price——————————20————————————————-18
Direct material (2$ per kg)————–(6)——————————————–(5)
Direct labour ——————————(4)———————————————(3)
Variable overhead———————-(2)———————————————(1.50)
Contribution————————–8—————————————————8.50
Material kg per unit——————–3———————————————–2.5
Contribution per material kg—-2.67———————————————-3.4Contribution per material kg $8.50/ 2.5 kg= $3.40
My question is that how contribution per material kg can be Shadow price?
Shadow price=contrubution per material kg +the normal market price per kg of materal-in this case 3.40+2$ per kg=5.40 why shadow price is not taken this amount instead Contribution per material kg $8.50/ 2.5 kg= $3.40 ?The way you have defined the shadow price is not correct. The shadow price is the most extra we would be prepared to pay for one extra unit of the limited resource (which is the same as the extra contribution we would make if we had one extra unit of the limited resource).
Here, if we had one extra kg of material we would make one extra unit of Qutwo (because it gives the higher contribution per kg). Therefore the contribution would increase by 3.40, and therefore this is the shadow price.
I do suggest that you watch my free lectures on linear programming (or re-watch if you have already watched them).
Dear Tutor, I have not watched the answer since I posted it.
If the shadow price is contribution per material kg then can we say 5.40 here is maximum price?there is a long question in becker asking maximum price and its calculation was above which I calculated
Yes. The shadow price is $3.40 and therefore the maximum we will be prepared to pay is $5.40.
(How old is your book? I ask because Becker no longer publish books and depending how old your book is there have been changes to the syllabus.)
Becker 2017 Revision question bank and the question that ? asked was ALBION Co question number 24.
Dear Tutor, Last time i failed with 47. I know my poor area is Life-cycle costing but the quesions relating to life-cycle costing is simple based questions. In my last exam, there was life-cycle questions which have never done such kind of exercises in my life.
I did all of the past papers, becker revision question and bpp but still failed. Also, I think that first section (A) of F5 exam is almost different and study texts do not provide enough information.
Now doing Kaplan test bank:)
I do not have the Becker books – only the BPP Revision Kit.
Have you watched all of my free lectures?
Dear Tutor, I have watched all of your lectures and it helped me a lot. The life-cycle costing in the book of opentuition is simple and last time, as I mentioned above, I saw long question with multiple choices was really completely different. It was too confusing, I could not manage the question. If you were making a long question relating to life-cycle costing, I would be really grateful.I remember the question but I can not describe it.Briefly, the question was confusing with having many years as well as with all types of costs but there were other costs which I do not know to include it or not.So anyway thank you for answer.
I do not remember there ever having been a long question in the exam (and obviously it cannot be a Section C question). If I am remembering wrong and you can find the question then tell me which date the exam was and I will be able to find it.
It was march 2020 exam question.It was section b with multiple choice question but it was too tough and challenging.I know that who faced this question they also at least 80% failed to manage those.If you can find this real exam question I really want to practice it. It is very very very good example for understanding the topic overall.
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