LINEAR PROGRAMMING Definition

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LINEAR PROGRAMMING (LP), in accounting, is the mathematical approach to optimally allocating limited resources among competing activities. It is a technique used to maximize revenue, contribution margin, and profit function; or, to minimize a cost function, subject to constraints. Linear programming consists of two ingredients: (1) objective function and (2) constraints, both of which are linear. In formulating the LP problem, the first step is to define the decision variables that one is trying to solve. The next step is to formulate the objective function and constraints in terms of these decision variables.

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SIMULATION is the representation of the operation or features of one process or system through the use of another. Computer simulation of waiting lines can determine the number of employees needed to serve customers at a particular time.

SOP is Statements of Position (within the AICPA or FASB) or Standard Operating Procedure.

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