Embedding management discretionary power into an ABC model for a joint products mix decision

Activity-based costing (ABC) and Theory of Constraints (TOC) are popular managerial tools for evaluating product mix decisions. A challenging aspect of the product mix problem involves evaluating joint products. These products involve complex interactions among resources and products and sequential...

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Bibliographic Details
Published inInternational journal of production economics Vol. 115; no. 1; pp. 210 - 220
Main Authors Tsai, Wen-Hsien, Lai, Chien-Wen, Tseng, Li-Jung, Chou, Wen-Chin
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.09.2008
Elsevier
Elsevier Sequoia S.A
SeriesInternational Journal of Production Economics
Subjects
Activity based costing
Activity-based costing (ABC)
Decision making
Discretionary power
Joint products
Operations management
Product mixes
Studies
Theory of constraints
Theory of constraints (TOC)
Theory of constraints (TOC)
Joint products
Activity-based costing (ABC)
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Summary:Activity-based costing (ABC) and Theory of Constraints (TOC) are popular managerial tools for evaluating product mix decisions. A challenging aspect of the product mix problem involves evaluating joint products. These products involve complex interactions among resources and products and sequential decisions concerning producing joint products and their further processing. ABC and TOC assume that managers either have complete control or have no control over labor and overhead resources. However, managers generally have varying degrees of control over these resources. The purpose of this paper is to develop a general ABC model that embeds management discretionary power over labor and overhead resources. The paper illustrates the general model leads to optimal joint product mix decisions when the ABC and the TOC may not.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2008.05.013