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| Author: | Bowe, M. Vonatsos, K. Zarkos, S. |
| Title: | Decision rules for allocating a limiting factor across products in a stochastic production environment: a real options approach |
| Journal: | Accounting and Business Research
2005 : VOL. 35:3, p. 183-205 |
| Index terms: | allocation decision making management accounting management science product mix |
| Language: | eng |
| Abstract: | The purpose of this article is to introduce a limiting factor of production when selecting the profit maximizing product mix of a multi-product firm. The writers develop a real option framework relevant for both tactical and strategic decision making to managers who operate in an environment of earnings uncertainty. The main result of this paper presents a decision rule for allocating a limiting factor across products based upon the ranking of different productsÂ’ real option values per unit of the limiting factor. |
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