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PLS CAN ANY ONE HELP ME EXPLAIN SHODOW PRICE IN CVP ANALYSIS

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PLS CAN ANY ONE HELP ME EXPLAIN SHODOW PRICE IN CVP ANALYSIS

PLS MY EMAIL IS kenzak2@yahoo.com

October 7th 2014 AN ACCA USER 650 Points

2 Replies

+1 Vote
hey dude thanks
October 7th 2014 AN ACCA USER 650 Points
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The shadow price is the cost of producing an extra unit where there is a binding constrain. I.e. If a company is limited to produce 500 units and produces 501 units, the shadow price would be the cost of producing the extra 1.
To calculate your shadow price, add one extra unit to the contribution maximizing combination of units to be produced. Then deduct the previous total cost of say (500units) from the total cost of (501 units) the difference, is your shadow price.

October 7th 2014 AN ACCA USER 140 Points
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