The shadow price of a slack variable in a linear programming solution that maximizes the total contribution margin reflects:
A) The amount of excess capacity available for the associated constraint
B) The decrease in contribution margin that occurs if a unit of the associated product is produced
C) The contribution margin returned by the firm's profitable product
D) The increase in contribution margin that would occur if another unit of the constrained resource were available

Question

Quizplus · Accepted Answer

The shadow price of a slack variable in a linear programming solution that maximizes the total contribution margin reflects the increase in contribution margin that would occur if another unit of the constrained resource were available. This means that if there is a certain resource constraint in the production process, the shadow price will indicate how much additional contribution margin can be earned if one more unit of that resource becomes available. Therefore, the best choice is D.

The Shadow Price of a Slack Variable in a Linear