What question did this study set out to answer?

The aim is to create a decision model that enhances traditional cost-volume-profit analysis by incorporating random demand and production levels.

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March 18, 2026

A General Decision Model for Cost-Volume-Profit Analysis under Uncertainty.

Key Points

The aim is to create a decision model that enhances traditional cost-volume-profit analysis by incorporating random demand and production levels.
Constructing a general decision model for C-V-P analysis
Analyzing various measures of uncertainty in profit behavior
Providing numerical examples to illustrate model applications
Offering two FORTRAN programs for computational aid
The model improves the realism of C-V-P analysis by addressing uncertainty factors.
Managers can optimally choose among alternative products and production levels based on firm goals.
Applications of the model show varying profit behaviors under different scenarios.

Abstract

Abstract ABSTRACT: This paper presents a general decision model for cost-volume-profit (C-V-P) analysis which takes into account the crucial elements of random demand and level of production in the determination of actual sales and resulting pro purpose of the model construction offered here is to invest C-V-P analysis with realism, and to remove a basic deficiency from the traditional C-V-P model. The general model enables the management to choose the pest among alternative products, and to determine, concurrently, optimal production levels in the light of a firm's goals and objectives. Various measures of uncertainty with regard to the behavior of the profit are developed, and their applications are illustrated in numerical examples. Two FORTRAN programs are also supplied to facilitate computation.

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