Encyclopedia of Operations Research and Management Science

2013 Edition
| Editors: Saul I. Gass, Michael C. Fu

Indirect Costs

Reference work entry
DOI: https://doi.org/10.1007/978-1-4419-1153-7_200317

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 zj. For cj, the original objective function coefficient for column j, the term (zjcj) or (cjzj) is used to determine if the associated variable is a candidate to enter the basic feasible solution. For any basic variable xk, (zkck) = 0. The (zjcj) terms are called relative costs (relative to the basis) or reduced costs.



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