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Hello Sir
Can you please help me with the following ques
Quone Qutwo
S.P 20 18
Direct mat 6 5
Direct Lab 4 3
Var.OH 2 1.5
Cont 8 8.5Max demand for is 500 for Quone and unlimited for Qutwo.What would be the shadow price of these materials if material were limited to 2000 kgs per week?
Thanks
You have not given enough information.
To answer, we need to know how many kgs of material each unit uses.Sorry my mistake. The above info is in dollars and price of material is $2 per kg.
Thanks
The contribution per kg of material is 8/3 = $2.67 for Quone, and 8.5/2.5 = $3.40 for Qutwo
So…we would prefer to use all of the limited material to make Qutwo,
If we are able to get more kgs, then each extra kg would be use to make Qutwo and would earn an extra 3.40 contribution.
So the shadow price is $3.40 per kg.
sravani: You are welcome 🙂
Hassan: the shadow price is the most extra you would be prepared to pay for one extra unit of a limited resource. There is only one way of calculating it – to calculate the extra contribution that would result if we had one extra unit of the limited resource. It will help you to watch the free lecture on linear programming.
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