Showing papers by "Robert S. Kaplan published in 1970"

A Dynamic Inventory Model with Stochastic Lead Times

Abstract: A study is made of a dynamic inventory model with stochastic lead times. A probability model is developed for the arrival of outstanding orders in which it is assumed that orders do not cross in time and that the arrival probabilities are independent of the number and size of outstanding orders. With these assumptions, it is shown that the sequential multidimensional minimization problem normally associated with the random lead time model can be reduced to a sequence of one-dimensional minimizations. The minimizations are a function of a variable representing the sum of stock on hand plus all outstanding orders. Optimal ordering policies are characterized under the assumptions of convex expected holding and shortage costs, a linear ordering cost and a fixed setup cost greater than or equal to zero paid when the order is placed. These policies are shown to be quite similar to those obtained with deterministic lead times but some differences in the behavior of the single-period critical numbers when the setup cost is zero are noted.

Overhead Allocation via Mathematical Programming Models

Abstract: : In the paper the authors have devised methods for allocating overhead charges on the basis of mathematical programming models of the firm's production and sales possibilities. The basic scheme was to charge products on the basis of their utilization of the scarce resources of the firm. The prices for use of these resources were obtained from the dual variables associated with the constraints of profit-maximizing programming models. Special attention was given to traceable and avoidable overhead and overhead subsidies that arise because of sales and production interdependencies or managerial constraints. The objective, in all of these procedures, has been to devise a method for allocating overhead that does not distort the relative profitability of products so that managers would make identical product related decisions both before and after the overhead allocation. As such, the method captures a principal benefit of direct costing analysis while significantly extending this benefit to recognize scarce resource utilization and interaction with other products in reporting profitability. At the same time, the method avoids a difficulty of direct costing systems in that it is a full costing system with all overhead being allocated to products. Also the availability of the original programming model (before any overhead allocations) facilitates marginal analysis for short term product related decisions and expansion of scarce resources. (Author)

Sequential Models in Probabilistic Depreciation

Abstract: : Probabilistic depreciation is a method of determining the proper depreciation charge in each year of an asset's service life, when the service life is a random variable with known distribution. The paper discusses how the service life distribution is modified as more information is obtained about the actual lifetime of the asset. The problem of determining the proper amount to be charged each year to depreciation while at the same time maintaining the proper balance in the accumulated depreciation account is considered. The analysis is done both for a single asset case and for group depreciation. A final section discusses the use of Bayesian analysis for estimating the particular form of the service life distribution while the assets are in service.

Discussion of the Time Series Behavior of Earnings

Abstract: My general impression of Professor Beaver's paper is that it is an excellent job of empirical analysis. However, I found as I was reading it that I was unsure as to the motivation and implication of the models being analyzed. At the outset, a number of empirical studies are mentioned that each use accounting earnings in some manner. Beaver concludes that the findings of these studies may be conflicting or paradoxical. The motivation for his study would have been much clearer had the conflicting or paradoxical conclusions he was referring to been specifically mentioned along with how the research described in the study was going to resolve these issues. We must be content, though, with statements that more knowledge of the accounting earnings process is required without specific indication of how this additional knowledge is going to be used. The tone of the opening and closing remarks in the paper suggest that Beaver had specific reasons for undertaking the investigation that was reported here and the contribution of the paper would have been clearer if he had spent more time in explaining the implications of his hypothesized models on existing valuation, dividend, and portfolio models. A primary conclusion of the empirical research is that the accounting earnings stream may be viewed as smoothing the underlying, more erratic, series of economic events that a firm experiences. I find this conclusion unsurprising so that the study serves mainly to validate prior beliefs, which is still, however, a useful goal. The particular type of smoothing discussed (allocating an equal share of unexpected return to some number of future periods) is admittedly only a first approximation to be refined in later analysis. Beaver feels that depreciation policy is a principal cause of such income smoothing and proposes to test this hypothesis in future research. I would