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Maximizing product mix profitability - what's the best analysis tool |
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| Authors: | TERRY LEE GERHARD PLENERT |
| Institution: | 1. Brigham Young University, Marriott, School of Management, Institute of Business Management , 660 TNRB, Provo, Utah, 84602, USA;2. Brigham Young University, Director, Productivity and Quality Research Group, Marriott School of Management, Institute of Business Management , 660 TNRB, Provo, Utah, 84602, USA |
| Abstract: | This paper takes a look at product mix profitability and compares several alternative methodologies for selecting the optimal product mix. It is argued that the optimal product mix is not determined using traditional accounting methodologies and that dropping marginally profitable products based on the accounting rules will give you less than optimal profitability. This paper looks at two different ways for coming up with the optimal product mix: one using theory of constraints (TOC) and another using linear programming. |
| Keywords: | product mix theory of constraints (TOC) linear programming |