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CMA Final · Strategic Cost Management · Linear Programming

In the final simplex table of a maximisation problem for Rao Textiles, the Zj - Cj entry under the slack variable of the cutting-hours constraint is 7. What does this indicate?

It indicates a shadow price of Rs 7 per cutting hour. The resource is fully used, and each additional hour of capacity would increase total profit by Rs 7 within the feasible range of the optimal basis.

  1. ACutting hours are in surplus by 7 hours
  2. BProfit rises by Rs 7 for each extra cutting hour, the shadow priceCorrect
  3. CProfit falls by Rs 7 for each extra cutting hour
  4. DCutting hours cost Rs 7 more than the budgeted rate

Explanation

In the optimal table, the Zj - Cj value under a slack variable is the shadow price of that resource, the marginal increase in objective value per extra unit. A positive value means the resource is scarce and fully used, so extra hours raise profit by Rs 7, not lower it.

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