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Product mix decisions based on ABC and TOC

Author

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  • Eva Výrostová

Abstract

The decision about a product mix presents a typical problem for manufacturing companies. This paper deals with possible enhancements to operations management by solving the optimal product mix problem while respecting the existing capacities. The main objective is to present a combination of activity-based costing (ABC) and theory of constrains (TOC), which allows the managers to obtain more precise information about the product mix with respect to existing bottlenecks, than would be the case with ABC or TOC alone. The combination of ABC and TOC enhances the decision making process by modelling relevant cost more precisely by using ABC, while simultaneously optimizing the product mix with respecting the existing physical constraints such as production capacity or demand constraints.

Suggested Citation

  • Eva Výrostová, 2015. "Product mix decisions based on ABC and TOC," Ekonomika a Management, Prague University of Economics and Business, vol. 2015(4).
    • Handle: RePEc:prg:jnleam:v:2015:y:2015:i:4:id:262
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    References listed on IDEAS

    as
    1. Plenert, Gerhard, 1993. "Optimizing theory of constraints when multiple constrained resources exist," European Journal of Operational Research, Elsevier, vol. 70(1), pages 126-133, October.
    2. Shapiro, Jeremy F., 1999. "On the connections among activity-based costing, mathematical programming models for analyzing strategic decisions, and the resource-based view of the firm," European Journal of Operational Research, Elsevier, vol. 118(2), pages 295-314, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    optimization; Optimalizácia; Activity-based costing; Theory of constraints; Product mix decisions; Kalkulácia nákladov podľa čiastkových aktivít; Teória obmedzení; Rozhodovanie o produktovom mixe;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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