Constrained Nonlinear Models for Optimal Allocations of Resources in Business Operations

Abstract

Given limited business resources, including monetary capital, raw materials, and labor, management often needs to make an optimal allocation of these resources so that its company as a whole can achieve the maximum contribution margin or profit. This paper focuses on applying constrained nonlinear models to study the optimal solutions of contribution margin and profit in businesses when multiple products are manufactured with limited business resources. The paper offers examples using these quantitative models as well as computer technology approaches, which can be incorporated into any cost accounting curriculum with the aim of enhancing students’ critical reasoning and quantitative skills.