6533b822fe1ef96bd127cb6d
RESEARCH PRODUCT
A contribution to the linear programming approach to joint cost allocation: Methodology and application
Alireza Tehrani Nejad MoghaddamChristian Michelotsubject
Marginal costMathematical optimizationCost allocationInformation Systems and ManagementSimplexGeneral Computer ScienceLinear programmingIterative methodManagement Science and Operations Researchcomputer.software_genreIndustrial and Manufacturing EngineeringExpert systemJoint costSimplex algorithmModeling and SimulationcomputerMathematicsdescription
Abstract The linear programming (LP) approach has been commonly proposed for joint cost allocation purposes. Within a LP framework, the allocation rules are based on a marginal analysis. Unfortunately, the additivity property which is required to completely allocate joint costs fails in presence of capacity, institutional or environmental constraints. In this paper, we first illustrate that the non allocated part can be interpreted as a type of producer’s surplus. Then, by using the information contained in the Simplex tableau we propose an original two-stage methodology based on the marginal costs and the production elasticity of input factors to achieve an additive cost allocation pattern. The distinguished feature of our approach is that it requires no more information or iterative computations than what is provided by the final Simplex tableau. A real-type refinery case study is provided.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2009-09-01 | European Journal of Operational Research |