Budgeting With Linear Programming

• In Event: Session C: Management Accounting

Abstract

Managers rely on information from cost accounting systems in building models to support their decision-making. In particular, estimates for direct materials, direct labor, and other manufacturing costs coupled with requirements for sales and manufacturing capacity are critical to product decision models. The Eliana Company illustrates how cost accounting data and linear programming will obtain an LP solution to a profit maximization problem, and then integrate the optimal solution back into the cost accounting system as a budget.

Author

• Dennis Fumio Togo, University of New Mexico