Interpreting the simplex tableau- sensitivity analysis, Managerial Accounting

Assignment Help:

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

 


Related Discussions:- Interpreting the simplex tableau- sensitivity analysis

Explain the investment versus speculation, Explain the Investment versus Sp...

Explain the Investment versus Speculation? In brief describes the following terms: a) Investment versus Speculation. b) Active and Passive Equity Management c) Systematic v

Planning, Planning A business must plan for its success. What do w...

Planning A business must plan for its success. What do we understand by business planning? It is about thinking in advance -- to decide on a course of the action to reach

Explain the types of standards, Explain the Types of standards The foll...

Explain the Types of standards The following is the brief description of various types of standards: 1) Basic standards: these are the standards which are assumed to remai

Transient analysis-absorbing state, Transient Analysis A state is said...

Transient Analysis A state is said to be transient if it is impossible to move to that state from any other state except itself. This state is temporary and eventually a stead

Explain activities uses through activities based costing, Explain Activitie...

Explain Activities uses through activities based costing In order to correctly associate costs with products and services. ABC assigns cost to activities based on their use of

Transportation problem-solution, Transportation Problem-Solution Soluti...

Transportation Problem-Solution Solution of the Transportation Problem: The fundamental steps of the transportation method are: Step 1:       Determine a preliminary b

Determine the fixed assets turnover ratio, Fixed assets turnover ratio ...

Fixed assets turnover ratio Meaning: this ratio establishes a relationship among net sales and fixed assets. Objective: the objective of computing this ratio is to verif

Determine the price determination process, Determine the Price determinatio...

Determine the Price determination process 1) Estimating the demand for the product: the first step in determining the price of a new product is to estimation the anticipated

Accounting profit, Accounting Profit is a company's sum total earnings, com...

Accounting Profit is a company's sum total earnings, computed according to Generally Accepted Accounting Principles (GAAP), and involves the explicit costs of operating business, l

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd