A new approach for allocating fixed costs among decision making units

Ruiyue Lin; Zhiping Chen; Zongxin Li

doi:10.3934/jimo.2016.12.211

Article Contents

2016, Volume 12, Issue 1: 211-228. Doi: 10.3934/jimo.2016.12.211

This issue Previous Article Dynamic mean-variance asset allocation with stochastic interest rate and inflation rate Next Article Time consistent policy of multi-period mean-variance problem in stochastic markets

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

Received: February 28, 2014

Revised: December 31, 2014

Published: December 2015

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Abstract

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.

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Mathematics Subject Classification: Primary: 91B32, 90B50; Secondary: 90C29.

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