Article ID: | iaor19911735 |
Country: | Netherlands |
Volume: | 20 |
Issue: | 1 |
Start Page Number: | 81 |
End Page Number: | 91 |
Publication Date: | Jul 1990 |
Journal: | Engineering Costs and Production Economics |
Authors: | Lin Tsong-Ming, Tsai Wen-Hsien |
This paper presents 0-1 Mixed Integer Programming model for the nonlinear multiproduct Cost-Volume-Profit analysis, which relaxes the assumptions of linear revenue-cost functions and constant fixed cost. In this model, nonlinear revenue and cost functions are approximated by piecewise linear functions, and the joint fixed cost function is represented by a step-increment function. With these features, the required capacity level and the optimal product mix could be determined simultaneously. A hypothetical example, illustrating the model, is presented together with the profit-maximization solution, the breakeven solution, and the target-profit solutions.