A Constrained Capital Budgeting Problem with Applications to Repair Kit Selection

John W. Mamer and Andrew W. Shogan
Additional contact information
John W. Mamer: Graduate School of Management, University of California, Los Angeles, California 90024
Andrew W. Shogan: School of Business Administration, University of California, Berkeley, California 94720

Management Science, 1987, vol. 33, issue 6, 800-806

Abstract: We consider a capital budgeting problem in which each potential project requires the performance of a known set of activities. In general, these sets of activities are not mutually exclusive. However, when a particular activity is common to the requirements of multiple projects, a single performance of the activity simultaneously satisfies the requirements of the multiple projects. Associated with the performance of each activity are two quantities: a known fixed cost and a consumption of a known amount of a scarce resource. Because the sets of activities required by the projects are not mutually exclusive, we cannot apportion an activity's fixed cost or resource consumption to a single project. In this paper, we formulate this capital budgeting problem (and a slight variant) as a maximal network flow problem with a side constraint, and we report computational experience using Lagrangian relaxation to find an optimal solution. We also discuss an application to the selection of parts and tools to include in a field repair kit used to fix a variety of types of breakdowns.

Keywords: capital budgeting; Lagrangean relaxation; network flow (search for similar items in EconPapers)
Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.33.6.800 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:33:y:1987:i:6:p:800-806

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().