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Using Linear Programming To Compare Direct and Absorption Costing.

The Accounting Review 1977 52(2), 485-491
Linear programming and optimal product mix decisions directed toward maximizing accounting income typically have assumed the use of direct costing. However, in this article a linear programming model is utilized to establish optimal sales and production levels which maximize income measured in terms of absorption costing. Since optimal sales and production levels may differ under the two systems, the use of linear programming represents a valuable pedagogical approach to the comparison of direct and absorption costing results in multiproduct situations.