On the Use of Pseudo Shadow Prices in a Multiperiod Formulation of the Production Planning Problem

A multiperiod linear programming model of the production planning problem is used to argue for a different costing, profit and resource-evaluation procedure in manufacturing. This procedure is based on the concept of ‘pseudo shadow prices’, and it avoids many of the pitfalls associated with the more traditional accounting methodologies. Conclusions are drawn which question the profit objectives used by many firms, as well as by those in academia.