Nonlinear multiproduct CVP analysis with 0-1 Mixed Integer Programming

Nonlinear multiproduct CVP analysis with 0-1 Mixed Integer Programming

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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: ,
Abstract:

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.

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