Substantiating the Prices for Enterprise Products on the Basis of Optimization Models

Abstract

It is determined that use of the economic-mathematical optimization models should be feasible in substantiating prices and volumes of products in order to maximize the profit of enterprise based on the analytical capabilities of the economic model of break-even production. The task of optimizing the determination of the level of prices and volumes of products in a multi-topic production is formulated in both substantial and mathematical form, allowing to receive the maximum profit at the limits in terms of the size of production capacity. As an optimization parameter, it is proposed to use the value of margin income by types of products for which the optimal values of price and volume are defined. A scheme is developed to solve the formulated task and recommendations are given for the implementation of its blocks. As the baseline data are used the price dependencies and variable costs per production unit on the volume of output, on the basis of which margin income per production unit along with the the corresponding production output are calculated. A step-by-step optimization method has been chosen to solve the task. Every step represents another type of production. Upon it is formed an array of value of margin income for the volume of products in the physical measurement with the selected interval, from which the maximum value is determined. The terms of the restriction are then checked. As result, the maximum margin income and the corresponding prices and production volume are determined for each product. Further, by subtracting from the maximum sum of the total fixed costs, the amount of profit is calculated, which is the maximum for the conditions of these optimization task. The proposed recommendations are checked using the example of conditional data for three types of products.

Keywords

• price
• profit
• fixed costs
• variable expenses
• margin income
• break-even model