Allocating fixed costs via data envelopment analysis

An issue of considerable importance involves the allocation of fixed costs among a set of competing entities in an equitable way. Based on the data envelopment analysis (DEA) theory, this paper proposes new method for allocating fixed costs to decision making units (DMUs) that the relative efficiency of decision making units after allocating fixed costs is the minimum distance with relative efficiency before allocating fixed costs. To illustrate our methods, numerical results for an example are described in this paper.

Keywords:

Data envelopment analysis , Fixed cost allocation , Efficiency