PMLinear Programming

Its time to learn so come here for F5 chapter wise discussion
and also tell me regarding ACCA June 2010 result when it will announce?

Linear programming is a method to know the optimal usage of scarce resources for the set objective:-

Profit maximisation:-
If an organisation has resource constraints (say limited hours of labour available for the period, or limited quantity of material avialable) the number of units of products to be produced with the limited resourses to achieve maximum profit can be identified through linear prgramming method. Here the the objective of the organisation is to maximise profit with the resource that is scarce.
If you draw a graph to know the line of best fit, the feasible region would be towards the corner of x and Y axis
Cost minimisation:-
The theory is same ,however, the objective of the organisation is changed. In this case, for eg.,there are situations for an organisation to maintain certain mix (raw materials etc) for the production process (the constraints), while looking for cost reduction. Linear programming is useful to identify the optimal mix (ie, which raw material to buy at what quantity )that will reduce the cost for the organisation.

If you draw a graph to know the line of best fit in this case the feasible region would be away from the corner of x and Y axis

It is possible to calculate the answer through simultaneous equations:-

However if the exam questions demand a graphical representation, as it is most likely, then you have no option but to claculate it through a graph, without which you may loose the deserved marks

past exam questions are available in ACCA offical web site

i just joint need a friend to do f5 with

@sathjyot said:
Linear programming is a method to know the optimal usage of scarce resources for the set objective:-

Profit maximisation:-
If an organisation has resource constraints (say limited hours of labour available for the period, or limited quantity of material avialable) the number of units of products to be produced with the limited resourses to achieve maximum profit can be identified through linear prgramming method. Here the the objective of the organisation is to maximise profit with the resource that is scarce.
If you draw a graph to know the line of best fit, the feasible region would be towards the corner of x and Y axis
Cost minimisation:-
The theory is same ,however, the objective of the organisation is changed. In this case, for eg.,there are situations for an organisation to maintain certain mix (raw materials etc) for the production process (the constraints), while looking for cost reduction. Linear programming is useful to identify the optimal mix (ie, which raw material to buy at what quantity )that will reduce the cost for the organisation.

If you draw a graph to know the line of best fit in this case the feasible region would be away from the corner of x and Y axis

It is possible to calculate the answer through simultaneous equations:-

However if the exam questions demand a graphical representation, as it is most likely, then you have no option but to claculate it through a graph, without which you may loose the deserved marks

past exam questions are available in ACCA offical web site

Thanks friend.

Could you say how we should find the optimal solution values to put in the equation ? I mean suppose if we have a polygon with 5 cornors say A,B,C,D and E , in this case how can we find the 'value for X inorder to put in the equation to find the Y value' in the contribution maximisation senario.


Regards
Jaison

in the case of max contribution senario you have to only calculate intersection point which are away from the x-axsis and y axsis.this calculation is done by solving equations simultaneously.
or if you are saying to get points which are used in graph part..then it is very easy
(say) 2x + 5y =10
let x = 0 then y = 2
let y = 0 then x =5
points for this equation will be (0,2) , (5, 0) { First one on x-axsis and second one on y - axsis. means for (0.2) " 0 " on x-axsis and 2 on y axsis }

I was looking at a question in the Kaplan text. Question "Quarko Co. I cant remember how to solve the equation.

4x + 2y = 480
0.5x + 0.5y = 80

I need to solve the equation in order to find the budgeted profit.

Could some please assist?

Thanks

Take 2 divided by 0.5 and you will get 4, this tell you that 0.5 x 4 = 2, so:
4x +2y = 280 --- 1
for 2nd equation, all multiply by 4:
2x + 2y = 160 --- 2
1 - 2:
2x = 120
x = 60
Then you can find y :)

Sorry 2nd equation is 2x +2y = 320 :)

Thank you.

I could do the equation up to that point but the answer in the text for both x and y is 80. I cant understand how they got that.

Using the equation about
2x + 2y = 320
2x = 320/2
x = 160
y = 160

Is that correct??

I don't understand backflush accounting. I read that topic several times but I am still not getting it. I am not sure if someone could explain it in a different way from the way it explained in the text. I would really appreciate the help.

Thanks

Sorry I made mistake in both equation, the equation should be:
4x + 2y = 480 --- 1
2x + 2y = 320 --- 2
1 - 2. 2x = 160 so x = 80
2x + 2y = 320
2 (80) + 2y = 320
2y = 160
y = 80

I try to give you the basic concept of backflush accounting. Backflush accounting is a method of cost accounting for a manufacturing environment. The measurement of costs is delayed until the production has been completed. No cost accounting records are made until after the end of the period.
At the end of the period, total costs incurred in producing the output are then worked backwards (backflushed) to find the raw material and conversion costs, then it is allocated to costs of sales and closing inventories.
In other word, costs are worked out retrospectively and WIP is ignored. :)

Thank you for the information on backflush accounting and also the equation.

Regarding the equation what I dont understand is as follows:

The original equation before mulitiplying by 4 was:

0.5x + 0.5y = 80 when multiplied by 4 is 2x + 2y = 320

My question is did you devide the 320 by 2 two times?

2x = 320
x = 160

Don't understand how you got the 80 and not 160?

You can't straight away find x and y using 2x + 2y = 320, you need another equation in order to get the x and y, the first equation which is 4x + 2y = 480 will be useful, the similar thing about two equation is the 2y, so you can use equation 1 minus equation 2, I will give you the full picture:
4x - 2x + (2y - 2y) = 480 - 320
2x = 160
x = 80
That's why I have to make the equation "0.5x +0.5y = 80" to "2x + 2y = 320" to have a similar number with equation 1 (in this case is 2y) so that I can do the minus of both equation :)

Thanks a lot. That is the part I wasn't sure about. You've been so helpful.

I am having a big problem with the make or buy decision as well as relevant costing. I can't seem to understand how BPP or Kaplan make the decisions on those questions. I read the BPP and Kaplan text and I am so frustrated.

There are two conditions in make-or-buy decision:
1. No limiting factor but can buy outside (outsource). In this case, you make decision by using the purchase cost per unit - variable cost per unit, if positive it means "saving cost per unit if make", then choose to make all yourself.
2. With limiting factor, must buy some outside. In this case, you have to decide which products to buy outside, to decide, first find out the saving cost per unit if make for each products, then divide by limiting factor (eg. hours) to get saving cost per hour, then do ranking for each products, the highest will be ranked 1st, the one with lowest ranking will be considered to buy outside first.

Remember that relevant cost is always FIC:
Future costs
Incremental costs
Cash flows

Other terms to explain relevant cost include:
Avoidable cost - this is like variable cost, you can avoid it if you didn't do the job, this is relevant cost.
Opportunity cost - benefit forgone or contribution loss, eg. if I want to do job A, I bring 2 labour from job B to work in job A, that two labour can earn $100 from job B, but because you bring them to job A, you loss the opportunity to make $100, this is opportunity cost.

I hope the brief explanation above can help you more in understanding :)