Publications

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Abstract: It is widely acknowledged that the amount of support service costs is steadily increasing for many companies. With respect to the accuracy of a costing system, this underlines the importance of allocating support service costs correctly. In this context the step method is commonly presented as good compromise between effort and accuracy. However, surprisingly little is known about the scope of the deviations resulting from the different allocation methods and recommendations are derived mainly from the properties of the alternative allocation methods. By using a wide range of simulation experiments, this paper quantifies the inaccuracy of the less laborious step method, the simple direct method as well as the formersâ?? associated sequencing heuristics. We develop a better understanding of losses in accuracy, and detect which main drivers as well as situations minimize them. We observe a maximum deviation of approximately 7 % for the step method and 5 % for the direct method. Contrary to expectations, we find the direct method to be more accurate or at least comparably accurate to the more complex step method in many settings. Overall, the results suggest that in diverse situations, the simple direct method can be preferred to the step method regarding accuracy, and when taking effort into account, it even surpasses the reciprocal method.