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Integrating activity-based costing and theory of constraints for making product-mix decisions

  • Xi'an Jiaotong University

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

This paper proposes an ABC-TOC model to make optimal product-mix decisions based on the assumptions of static analysis and maximization of profitability. In this model, activity cost behavior is analyzed using ABC, the degree of control on activity capacity is set as an endogenetic variable; the impact of the opportunity costs of controllable activity capacity on decision is considered; relative constraints are identified by using TOC. A numerical study indicates that ABC-TOC model is a more general product-mix decision model. When the control degree on activity capacity is zero, the optimal product-mix derived from ABC-TOC model is the same as those from TOC. While full control on activity capacity and no opportunity costs, the optimal product-mix derived from ABC-TOC model is the same as those from ABC.

Original languageEnglish
Title of host publicationProceedings of 2007 International Conference on Management Science and Engineering, ICMSE'07 (14th)
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages620-626
Number of pages7
ISBN (Print)9787883580805
DOIs
StatePublished - 2007
Event2007 International Conference on Management Science and Engineering, ICMSE'07 - Harbin, China
Duration: 20 Aug 200722 Aug 2007

Publication series

NameProceedings of 2007 International Conference on Management Science and Engineering, ICMSE'07 (14th)

Conference

Conference2007 International Conference on Management Science and Engineering, ICMSE'07
Country/TerritoryChina
CityHarbin
Period20/08/0722/08/07

Keywords

  • ABC
  • Activity capacity
  • Product-mix decisions
  • TOC

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