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Deciding product mix based on time-driven activity-based costing by mixed integer programming

Author

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  • Zheng-Yun Zhuang

    (Zhejiang University)

  • Shu-Chin Chang

    (Chung Yuan Christian University)

Abstract

To determine a product mix for a production process, this study proposes a mixed-integer programming (MIP) model, based on the time-driven activity-based costing (TDABC) accounting system. By using a time driver from the resource to the cost objects and simultaneously dealing with numerous resource limitations, the model obtains a global optimal decision. The model highlights the difference between supply and the use of the capacity. It avoids some possible limitations of the programming modeling approach when theory of constraints (TOC) or activity-based-costing (ABC) is used. The model is illustrated using a numerical example. In the form of a budgeted income statement, the results for the formulated MIP models that use TOC, ABC and TDABC are compared, in terms of resource-used-based profit, resource-supplied-based profit and cash flow. The proposed MIP model that uses TDABC is shown to support a product mix decision, on which studies of TDABC seldom focus. Implications for the use of this accounting system adoption to determine product-mix are detailed.

Suggested Citation

  • Zheng-Yun Zhuang & Shu-Chin Chang, 2017. "Deciding product mix based on time-driven activity-based costing by mixed integer programming," Journal of Intelligent Manufacturing, Springer, vol. 28(4), pages 959-974, April.
    • Handle: RePEc:spr:joinma:v:28:y:2017:i:4:d:10.1007_s10845-014-1032-2
    DOI: 10.1007/s10845-014-1032-2
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    References listed on IDEAS

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    Cited by:

    1. Tarzibashi Omar Fikrat Fateh & Ozyapici Hasan, 2019. "The Impact of the Magnitude of Overhead Costs on the Difference Between ABC and TDABC Systems," Foundations of Management, Sciendo, vol. 11(1), pages 81-92, January.
    2. Hocine, Amin & Zhuang, Zheng-Yun & Kouaissah, Noureddine & Li, Der-Chiang, 2020. "Weighted-additive fuzzy multi-choice goal programming (WA-FMCGP) for supporting renewable energy site selection decisions," European Journal of Operational Research, Elsevier, vol. 285(2), pages 642-654.
    3. Grégory Wegmann, 2017. "A typology of cost accounting practices based on activity - based costing - a strategic cost management approach and a case study," Post-Print hal-01858953, HAL.

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