Interpreting the simplex tableau- sensitivity analysis, Managerial Accounting

INTERPRETING THE SIMPLEX TABLEAU

We can now see that our attention must be directed to reading, interpreting and analyzing the (simplex) results. It is erroneous, however, to assume that only one can interpret the simplex tableau without having adequate knowledge of how and why the simplex method works.

It will be disappointing to you to think that all we can get out of the optimum simplex tableau is a list of variables and their optimum values. The fact is that the simplex tableau is "loaded" with important information, the least of which are the optimum values of the variables. The following list summarizes the information that can be obtained from the simplex tableau, either directly or with simple additional computations.

1. The optimum answer
2. The position of resources
3. The unit value of each resource
4. The sensitivity of the optimum answer to changes in availability of resources, coefficients of the objective function, and usage of resources by activities.

The first three items are readily available in the optimum simplex tableau. The fourth item requires additional computations that are based on the information in the optimum solution.

To demonstrate these items we use the same example, which we repeat here for convenience.

The optimum tableau is specified as:

1596_table.jpg



Maximise:    Z = 3XE + 2X1

Subject to:    XE + 2X1 + S1 = 6

2XE + 2X1 + S2 = 8
-XE + 2X1 + S3 = 1
X1 + S4 = 2

X1, XE, S1, S2, S3, S4 ≥ 0

 

Posted Date: 12/7/2012 6:43:51 AM | Location : United States







Related Discussions:- Interpreting the simplex tableau- sensitivity analysis, Assignment Help, Ask Question on Interpreting the simplex tableau- sensitivity analysis, Get Answer, Expert's Help, Interpreting the simplex tableau- sensitivity analysis Discussions

Write discussion on Interpreting the simplex tableau- sensitivity analysis
Your posts are moderated
Related Questions
Firms need cash to invest in inventory, receivables and fixed assets and to create payments for operating expenses, so as to increase earnings and sales and make sure the smooth ru

Suppose the consumer is at coffee shop 2. Coffee shop 2 provides unlimited cups of coffee for the price of $9.00 per day. - How many cups would she drink a day and how much woul

Monitor Let's start by having you think about the controlling your car (aka "driving")! Your steering, acceleration, and braking are not the random things to be done; they are

RELEVANT COSTS FOR NON-ROUTINE DECISIONS A relevant cost is a cost that is appropriate to a specific management decision. To be relevant, a cost should be: 1) Future cost

Transfer Pricing Methods Transfer pricing methods are concerned with the alternative means by which a transfer price can be set and its impact on organizations gauged. Emmanuel

Advantages of Transfer Pricing (a) Transfer pricing is similar to cost apportionment and allocation in that values of one department are passed to another. For cost apportionme


Determine the Functions of management accounting: 1. Planning and forecasting: management fixes various targets to be achieved by the business in near future. Planning and fo

Liquidity ratios Liquidity refers to the ability of concern to meet its current obligations as and when these become due. The short term obligations are met by realizing amount