Indirect costs

In the simplex method, the indirect costs are found by taking the inner products of the multiplier (pricing) vector with each column of the problem's defining A matrix. This product, for a column j, is usually denoted by z _j. For c _j, the original objective function coefficient for column j, the term (z _j − c _j)or (c _j − z _j) is used to determine if the associated variable is a candidate to enter the basic feasible solution. For any basic variable x _k, (z _k − c _k) = 0. The (z _j − c _j) terms are called relative costs (relative to the basis) or reduced costs. Prices.