Decision Sciences Journal
Volume 31, Number 4
Fall 2000
Cost Efficiency Benchmarking for Operational Units with Multiple
Cost Drivers
Marvin D. Troutt
Department of Management & Information Systems, Kent State
University, Kent, OH 44242-0001, email: mtroutt@bsa3.kent.edu
Donald W. Gribbin
School of Accountancy, Southern Illinois University at Carbondale,
Carbondale,
IL 62901-4631, email: dgribbin@cba.siu.edu
Murali Shanker
Department of Management & Information Systems, Kent State
University, Kent, OH 44242-0001, email: mshanker@kent.edu
Aimao Zhang
Management Department, Southern Illinois University at Carbondale,
Carbondale, IL 62901-4627, email: aimao@siu.edu
ABSTRACT. We consider the activity-based costing situation,
in which for each of several comparable operational units, multiple
cost drivers generate a single cost pool. Our study focuses on
published data from a set of property tax collection offices,
called rates departments, for the London metropolitan area. We
define what may be called benchmark or most efficient costs per
unit of driver. A principle of maximum performance efficiency
is proposed, and an approach to estimating the benchmark unit
costs is derived from this principle. A validation approach for
this estimation method is developed in terms of what we call
normal-like-or-better performance effectiveness. Application
to longitudinal data on a single unit is briefly discussed. We
also consider some implications for the more routine case when
costs are disaggregated to subpools associated with individual
cost drivers.
Subject Areas: Activity-based Costing, Data Envelopment
Analysis, Mathematical Programming, Performance Evaluation, and
Statistics. |