# American Institute of Mathematical Sciences

January  2016, 12(1): 211-228. doi: 10.3934/jimo.2016.12.211

## A new approach for allocating fixed costs among decision making units

 1 Department of Computing Science, School of Mathematics and Statistics, Xi'an Jiaotong University, Xi'an, Shaanxi, 710049, China, China, China

Received  March 2014 Revised  January 2015 Published  April 2015

How to equitably distribute a common fixed cost among decision making units (DMUs) of an organization is a typical problem in organization management. Based on the data envelopment analysis technique, this paper proposes a new proportional sharing model to determine a unique fixed cost allocation under two assumptions: efficiency invariance and zero slack. It is noteworthy that the fixed cost allocation determined by our proportional sharing model is a feasible solution to the model proposed by Cook and Zhu [Cook and Zhu, Allocation of shared costs among decision making units: A DEA approach, Computers & Operations Research, 32 (2005) 2171-2178]. To ensure the uniqueness of the fixed cost allocation, three algorithms are proposed under the new model. Different from current fixed cost allocation methods under the efficiency invariance assumption, our approach can generate a fixed cost allocation that is unique, partially dependent of DMUs' inputs and units-invariant, and thus is more effective. Numerical examples are used to illustrate the validity and superiorities of our approach.
Citation: Ruiyue Lin, Zhiping Chen, Zongxin Li. A new approach for allocating fixed costs among decision making units. Journal of Industrial & Management Optimization, 2016, 12 (1) : 211-228. doi: 10.3934/jimo.2016.12.211
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