The Accounting Review Vol. 45 No. 3 1970

The Application of the Hirsch-Dantzig "Fixed Charge" Algorithm to Profit Planning: A Formal Statement of Product Profitability Analysis.

Roger Groves¹; Rene Manes²; Robert Sorensen³

¹ Graduate Assistant in Accounting, Graduate School of Industrial Administration, Purdue University. 1 · ² Associate Dean of Size Krannert, Graduate School of Industrial Administration, Purdue University. 2 · ³ Purdue University 3

Abstract

In marginal analysis, there is a tendency to overlook the problems of fixed costs. In multi-product firms, however, there are many possible fixed costs. Such firms attempting to optimize profit under capacity constraints must take into account not only their gross margin but also net profit, i.e., profit after incurrence of various alternative fixed charges. Hirsch and Dantzig proposed the original integer programming solution to the "fixed charge" problem and their approach applies directly to product profitability analysis. Their algorithm is demonstrated in a marketing example and the imputations for accountants of this application of operations research technique are discussed.

DOI

10.2308/tar-4491895

Volume

45

Issue

3

Pages

481-489

Language

en

Sources

openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓