ACCA PM · Chapter 6 · Question 5 of 10
Omega Co makes products X and Y. Contribution is $40 per unit of X and $50 per unit of Y. Constraints are: Labour: 2x + 4y <= 4,000 hours Machine: 3x + 2y <= 3,600 hours Demand for X: x <= 1,000 units where x and y are the units of X and Y produced. What is the shadow price of one labour hour?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $8.75
Explanation
Adding one labour hour and solving 2x + 4y = 4,001 with 3x + 2y = 3,600 gives x = 799.75, y = 600.375. New contribution = (40 x 799.75) + (50 x 600.375) = $62,008.75, an increase of $8.75. Equivalently, solving 2L + 3M = 40 and 4L + 2M = 50 gives L = $8.75 and M = $7.50.
More Limiting factors and linear programming MCQs
- Q7In the optimal solution to a linear programming problem, machine hours are not fully used. Which of the following is true of the…
- Q8When solving a two-product linear programming problem graphically, how is the optimal point identified?
- Q9Omega Co makes products X and Y. Contribution is $40 per unit of X and $50 per unit of Y. Constraints are: Labour: 2x + 4y <= 4,000 hours…
- Q10Psi Co makes products X and Y. Each unit of X uses 2 kg of material M and each unit of Y uses 5 kg. Only 10,000 kg of material M are…
- Q1Tau Co makes three products. Labour is limited to 12,000 hours next period. Product X: contribution $24 per unit, 3 labour hours per unit…