Fuzzy programming for optimal product mix decisions based on expanded ABC approach

Abstract

In this paper, we deal with the problem of determining the optimal product mix and production quantities based on expanded ABC (activity-based costing) approach in the presence of obscure estimation of parameters for the capacities of the activities and the demands of each product. First, we give the mixed zero-one programming model such that the profit is maximised subject to capacities of activities and demand of products. Second, to handle vagueness of capacity and demand in real-life production systems in fuzzy environments, fuzzy programming is presented. We employ linear membership functions for the capacity of each activity and demand of each product. Using the data in the study of Kee (1995), we show the usefulness of the fuzzy model.

Keywords:

• fuzzy methods
• expanded ABC
• mathematical programming
• product-mix