Multiproduct CVP analysis based on contribution rules

The basic cost-volume-profit (CVP) model - linear, non-stochastic and restr icted to one product - has been the subject of research work aimed at relax ing these limiting assumptions. Regarding its extension to a multiproduct s ituation, the two alternatives are to use a standard mix, or to apply linea r programming. This paper develops an alternative model for multiproduct CV P. It uses data provided by ABC systems designed to keep track of variable and fixed costs, and requires the model user to formulate a contribution ru le that will allow to compute, for each product, the output required to ach ieve a given (target) profit. (C) 2001 Elsevier Science B.V. All rights res erved.