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This paper proposes an ABC-TOC model to make optimal product-mix decisions based on the assumptions of static analysis and maximization of profitability. In this model, activity cost behavior is analyzed using ABC; the degree of control on activity capacity is set as an endogenetic variable; the impact of the opportunity costs of controllable activity capacity on decision is considered; relative constraints are identified by using TOC. A numerical study indicates that ABC-TOC model is a more general product-mix decision model. When the control degree on activity capacity is zero, the optimal product-mix derived from ABC-TOC model is the same as those from TOC. While full control on activity capacity and no opportunity costs, the optimal product-mix derived from ABC-TOC model is the same as those from ABC.
Date of Conference: 20-22 Aug. 2007