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Contribution per unit of scarce resource
Cee = $105/5 = $21, Dee = $96/6 = $16
“Cee will be produced first. Material requirements for Cee = 60,000 × 5kg = 300,000 kg, less than the 500,000 kg available, so the shadow price will be the contribution per unit of scarce resource for Dee as production of Dee will be restricted.” This is an extract from the study hub. Would the shadow price be $37 if the production for both products were restricted?
What are you asking…and why?
The shadow price can be calculated for any limited resource, and if both products are constrained by the same resource, yes, you would analyse the impact of that limitation on the overall contribution.Thanks for providing me with a response. I was confused so I didn’t really know how to ask the question.
The question said in the next period, maximum demand for each product will be 60,000 units of Cee and 45,000 units of Dee. Material will be restricted to 500,000 kg. So I just wanted to know what the shadow price would be if there wasn’t enough material to produce the maximum demand for any of the products.
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