Combined Cost and Linear Programming Models of Industrial Complexes

Abstract

Many industrial complexes are chains of unit processes, the end-product of one process being the raw material for another; often the same process can also make several end-products sequentially and, furthermore, intermediate products can be bought in or sold. In managing these "multi-processes", cost accountants often use input/output models to measure historic internal costs while simultaneously, planners calculate the most profitable future mix of end-products from linear programming (LP) models. A general combined cost/LP model is proposed here, usable either for costing purposes or for LP planning. Its cost version can include standard cost techniques; when used with the planning version, it leads to the concept of "super-standard" costs for the most profitable way of running the multiprocess. The combined model is thus a basic part of an overall management information and control system.