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.
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(2013). Indirect Costs. In: Gass, S.I., Fu, M.C. (eds) Encyclopedia of Operations Research and Management Science. Springer, Boston, MA. https://doi.org/10.1007/978-1-4419-1153-7_200317
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