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<p>This paper presents a new approach for fair fixed cost allocation among decision-making units (DMUs) by combining ratio analysis and data envelopment analysis (DEA) under a common set of weights (CSW). The proposed model uses output-to-input ratios to proportionally allocate fixed costs based on the production scale and resource usage of each DMU. A set of common weights from the input-to-output component ratios determined by the common weights in the ratio analysis model is the basis of this allocation program. A key theoretical contribution is establishing the equivalence between the output-oriented ratio analysis model and the input-oriented DEA model. The model ensures that the efficiency scores of DMUs remain invariant before and after cost allocation. A real-world case study of commercial banks demonstrates the model’s practical applicability, highlighting its advantages over traditional DEA and game-theoretic allocation methods in terms of fairness, transparency, and ease of implementation. The model can support regulatory agencies and central planners in transparent and consistent cost distribution.</p>

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Fixed cost allocation using ratio analysis based on the input-to-output scale and common set of weights: a case study of commercial banks

  • 期刊论文

  • 发表日期：

    2025年10月3日

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  • Javad Gerami

摘要

This paper presents a new approach for fair fixed cost allocation among decision-making units (DMUs) by combining ratio analysis and data envelopment analysis (DEA) under a common set of weights (CSW). The proposed model uses output-to-input ratios to proportionally allocate fixed costs based on the production scale and resource usage of each DMU. A set of common weights from the input-to-output component ratios determined by the common weights in the ratio analysis model is the basis of this allocation program. A key theoretical contribution is establishing the equivalence between the output-oriented ratio analysis model and the input-oriented DEA model. The model ensures that the efficiency scores of DMUs remain invariant before and after cost allocation. A real-world case study of commercial banks demonstrates the model’s practical applicability, highlighting its advantages over traditional DEA and game-theoretic allocation methods in terms of fairness, transparency, and ease of implementation. The model can support regulatory agencies and central planners in transparent and consistent cost distribution.