Discussion
While solving a transportation problem by applying Vogel's approximation method to a profit maximisation problem, row and column penalties are determined by :
Answer: B
Penalties are found from the difference between the two highest unit costs in each row and column, the figures here being profits.
In a minimisation problem, Vogel's method takes the difference between the two lowest costs in each row and column: the penalty for not using the cheapest cell. In a profit maximisation problem the best cell is the one with the highest profit, so the penalty is the profit lost by not using it, the difference between the highest and second highest values. Allocation then goes to the row or column with the largest penalty, in its highest-profit cell.
The difference between the two lowest values is the rule for minimisation, and the single smallest or largest value is not a penalty at all. (Equivalently, the profit matrix can be converted into an opportunity loss matrix and solved as minimisation.)
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