MANAGEMENT
AND COST
ACCOUNTING
SIXTH EDITION
COLIN DRURY
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2004 Colin Drury
Part Six:
The application of quantitative methods
to management accounting
Chapter Twenty-six:
The application of linear programming
to management accounting
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.1a
Linear programming
© 2000 Colin Drury
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2004 Colin Drury
26.1b
Example contd.
© 2000 Colin Drury
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2004 Colin Drury
26.2
Materials constraint (8Y + 4Z  3,440 (When Y= 0, Z = 860; when Z= 0, Y = 430
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.3
Labour constraint 6Y + 8Z  2,880 (When Z = 0, Y = 480; When Y = 0, Z =360)
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.4
Machine capacity constraint 4Y + 6Z  2,760 (When Z = 0, Y = 690; when y = 0, Z = 460)
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.5
Sales limitation Y  420
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.6
Optimum solution
Feasible production combination = Area ABCDE
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.7
Optimum solution
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.8a
Simplex method
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.8b
Simplex method contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.9
Simplex method contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.10
Simplex method contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.11a
Simplex method contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.11b
Simplex method contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.12a
Capital rationing
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.12b
Capital rationing contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.13
Capital rationing contd.
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury
26.14
Assumptions underlying LP
1.
Linearity
2.
Divisibility of products
3.
Divisibility of resources
4.
All of the available opportunities can be included in the model
5.
Assumed fixed costs are constant for the period
Management and Cost Accounting, 6th edition, ISBN 1-84480-028-8
© 2000 Colin Drury
© 2004 Colin Drury