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John Moffat.
John Moffat.-
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mjibola
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Is it possible to use the contribution per unit of limited material to calculate the shadow price of that material?
A Kaplan question used this approach to calculate shadow price and as the question did not provide enough information to use simultaneous equations as you did in your lectures but provided selling and variable cost information, I’m not so sure.
Thanks sir.
John Moffat
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The shadow price is the extra contribution that can be earned by having one extra unit of the limited resource.
As to whether that means having to solve simulatenous equations or not depends on how many limited resources there are at the optimal solution. If there is only one limited resource at the optimal solution, then obviously simultaneous equations are not needed.
I cannot help you with your Kaplan question without seeing the actual question!!
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