High School

While analyzing your supply chain manufacturing, your Solver analysis resulted in a shadow price of $242.85 per kilogram for tungsten, with an allowable increase of 195 kilograms and an allowable decrease of 245 kilograms. You currently have 400 kilograms of tungsten in stock. From the analysis provided, clearly, you should consider:

A. Buying 255 kg of tungsten for $255 per kilogram
B. Selling 190 kg of tungsten for $235 per kilogram
C. Selling 255 kg of tungsten for $255 per kilogram
D. Buying 190 kg of tungsten for $235 per kilogram

Answer :

Based on the Solver analysis, you should consider selling 190 kg of tungsten for $235 per kilogram.

What is the rationale behind selling 190 kg of tungsten for $235 per kilogram?

The shadow price of $242.85 per kilogram for tungsten indicates the maximum amount a company is willing to pay for an additional unit of tungsten. Since the allowable decrease is 245 kilograms, selling 190 kg of tungsten falls within the acceptable range. Selling at a higher price of $235 per kilogram generates a profit of $44,650 (190 kg * $235/kg), which can contribute positively to the company's financials. Furthermore, the decision to sell rather than buy is based on the fact that the allowable increase is only 195 kilograms, making selling a more suitable option to optimize the supply chain.

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