A General Matrix Model Of Support Department Cost Allocation Methods

Abstract

This paper demonstrates that the direct and step methods for making support department allocations are really special cases of the more general reciprocal method, and that the different allocations can be estimated using the same basic model. Simple modification of the matrix of resource consumption between support departments is all that is required to use a matrix algebra approach for all three methods. Potential benefits accruing to users and practitioners from the use of these models and areas of possible future research are discussed in the paper.