Impact of ABC information on product mix and costing decisions

Abstract

Our primary aim in this paper is to develop and demonstrate a mixed integer programming model that utilizes activity-based cost information to determine optimal product mix and product cost in a multi-product manufacturing environment. The model permits interesting insights to be gained into the evaluation of marginal cost of products and marginal worth of resources for decision making involving product mix, product costing and capacity expansiodcontraction. It also addresses the issue of how to determine the cost of idle capacity and attribute it to the different products. An example is presented to demonstrate the findings of the model, which we then compare with analogous results from a traditional linear programming-based approach. Extensions to the mixed integer programming model are also provided.

A new mathematical approach in integration of activity-based costing information in supply chain order management

“…Malik and Sullivan (1995) demonstrated the impact of ABC information on product mix and costing decision through a mixed-integer programming model. The advantages of this model were shown through a small pilot problem with four products and for the larger scale problems they applied a heuristic method.…”

Applying a mathematical programming approach for a green product mix decision

“…In recent years, some researchers have utilised various mathematical programming approaches to conduct a product-mix decision analysis (Kee 1995;Malik & Sullivan 1995;Yahya-Zadel 1998;Kee & Schmidt 2000). Tsai and Hung (2009a) propose a fuzzy goal programming approach that integrates activity-based costing and performance evaluation in a value chain structure for optimal green Green products need the cost requirements…”

Product Mix Optimization for Semiconductor Manufacturing Based on AHP and ANP Analysis

“…The objective of such a problem is to maximize the profit from various product mix combinations, subject to constraints on different resources [17]. Manufacturing a product requires a certain amount of resource of each type that is limited.…”

“…Cost accounting involves estimating the manufacturing cost of each product type appropriately to find a product mix that maximizes the company's profit. Malik [17] developed a mixed-integer programming model utilizing activity-based cost information to determine optimal product mix and product cost in a multi-product manufacturing environment. The second aspect, manufacturing planning, involves maximizing the efficiency of capacity allocation across products.…”