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MULTIPRODUCT C‐V‐P ANALYSIS AND UNCERTAINTY: A LINEAR PROGRAMMING APPROACH
Author(s) -
Miller Robert E.,
Morris Michael H.
Publication year - 1985
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1985.tb00789.x
Subject(s) - benchmark (surveying) , margin (machine learning) , linear programming , product (mathematics) , mathematical optimization , simple (philosophy) , resource (disambiguation) , solver , computer science , extension (predicate logic) , ex ante , robust optimization , economics , econometrics , operations research , mathematics , machine learning , computer network , philosophy , geometry , geodesy , epistemology , macroeconomics , programming language , geography
The most general extension of the traditional one product C‐V‐P model incor‐ porates a multiproduct setting under uncertainty. This study utilizes LP to address both components (product mix and uncertainty of resource prices) to obtain the best product mix available in an ex ante sense. The results provide a benchmark for the evaluation of future operations and enable one to calculate the probability of any level of contribution margin. The study also serves as a useful educational tool by providing a mathematical and graphical depiction of the complexity of the problem, and by explicitly demonstrating the role of uncertain resource costs and uncertain selling prices in a simple LP formulation.