We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
MULTIPRODUCT C-V-P ANALYSIS AND UNCERTAINTY: A LINEAR PROGRAMMING APPROACH.
- Authors
Miller, Robert E.; Morris, Michael H.
- Abstract
This article describes an application of linear programming to a multiproduct costs to volume and profit (C-V-P) problem with uncertainty of selling prices and variable costs. Its value lies in its clear depiction of the complexity introduced by uncertainty, both mathematically and graphically, its explicit demonstration of the role of resource costs in the LP formulation, and its presentation of an example for explanatory purposes. The results provide a means of establishing the best ex ante product mix, which is often overlooked or assumed away in conventional sensitivity analysis or more recent probability analysis. The results also provide a benchmark for contribution margin, which serves as a goal for the firm and establishes a standard for overall performance evaluation. And finally, the results of this study in combination with previous research provide a procedure for calculating the probability of any level of contribution margin associated with the selected product mix. Investigation of the proximity of the two values is an empirical question dependent on the firm, the problem definition and the underlying distributions of the random variables. Perhaps a simulation approach could yield some answers in this regard.
- Subjects
LINEAR programming; VARIABLE costs; INDUSTRIAL costs; PRODUCT mixes; PRODUCT management
- Publication
Journal of Business Finance & Accounting, 1985, Vol 12, Issue 4, p495
- ISSN
0306-686X
- Publication type
Article
- DOI
10.1111/j.1468-5957.1985.tb00789.x