Basic assumption of transportation model, Managerial Accounting

Basic Assumption of Transportation Model

The basic assumption of the model is that the transportation cost on a given route is directly proportional to the number of units transported. The "unit of transportation" will differ based on the "commodity" transported i.e. a truck load may be a better unit than single product units.

559_diagram1.jpg


m = Source
n = Destination

A source or destination is represented by a node. The line joining a source with a destination represents the route through which the commodity is transported.
The quantity of supply at source i is ai and the demand at destination j is bj. The "unit" transportation cost between source i and destination j is cij

Let xij represent the amount transported from i to destination j.

The LP Model symbolizing the transportation problem is given usually as:

1127_diagram2.jpg

     
 xij > 0 for all i and j

(1)   It stipulates that the sum of the shipments from a source cannot exceed its supply.
(2)   It requires that the sum of the shipments to a destination must satisfy its demand.

529_diagram3.jpg

The model explained above implies that the total supply


must at least equal the total demand if the total supply equal the total demand then it is called a balanced transportation model.  It differs from the above model in the fact that all constraints are equations.

1529_diagram5.jpg

 

In actual life, this is not essentially true. Though, a transportation model can always be balanced. The balancing, in addition to its usefulness in modeling certain practical situations is important for the development of a solution method that fully exploits the special structure of the transportation model.

 

 

 

Posted Date: 12/7/2012 7:25:41 AM | Location : United States







Related Discussions:- Basic assumption of transportation model, Assignment Help, Ask Question on Basic assumption of transportation model, Get Answer, Expert's Help, Basic assumption of transportation model Discussions

Write discussion on Basic assumption of transportation model
Your posts are moderated
Related Questions
Managerial Accounting Before going to Managerial Accounting let us discuss a bit about Financial Accounting. Financial accounting is concerned with reporting to the external pa

if equipment will be depreciated on a straight-line depreciation basis over a five year period with an estimated residual value, what do I do with this information in a investment

Classification and computation of variances The computation and analysis of variances is the main aim of standard costing. The variance is the difference among the standard pe

1. Explain Value Added Analysis along with the major factors included in Management Accounting Analysis. 2 Identify the several top management styles and define their implicatio

Explain Administration cost and Pre production costs Administration cost: The cost of formulating policy, directing the organization and controlling the operating of an u

The following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will

Two types of costs concerned in factoring are as: 1) The service fee or factoring commission 2) The interest on advances granted through the factor to the firm. Factoring

The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor

Markov Analysis It is a way of analyzing the current movement of some system in an effort to predict the future movement of the same system. There are two elements that must be

Application of Information technology in respect of management information system