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
Proprietary ratio/ equity ratio  Meaning: the ratio measures a relationship among proprietor's funds and the total assets. Objective: the objective of computing this ra

Explain:- Q.1 As a potential investor, what is the problem with different countries having different accounting standards? As the president of a multinational company, what is

Costing Cost accounting can be described as the collection, interpretation of cost and assignment. In succeeding chapters, you will learn about alternative costing techniq

In the earlier unit, we have studied how firms determine their requirements for current assets and manage their holdings in cash and marketable securities. Inside a classical manuf

These loans are given by the Banker for short periods for an exact activity like financing for a civil contract work. As the customer receives payment, the transaction will be repa


Economies or Diseconomies of Scale The costs of a value activity are often subject to economies or diseconomies of scale. Economies of scale occur from the capability to perfo

what is the computation procedure of accounting rate of return?

Risk : Risk includes circumstances or events that may or may not take place though whose probability of occurrence can be predicted from the past records. In this atmosphere, t

Answer each of the following independent questions in the space provided on page 11. Round all computations to the nearest dollar. a) Company A deposited $15,000 in a savings ac