Input-Output Analysis for Cost Accounting, Planning and Control.

Abstract The article discusses input-output analysis for cost accounting, planning and control. The term "interacting departments" is used here to describe departments, which both make and receive allocations of costs to and from other departments. An example would be a service department which supports several operating departments and which in turn receives support from other service departments. The purpose of this article is to present some more powerful extensions of simultaneous linear equation systems and linear algebra to handle the interactive cost allocation problems. Input-output analysis summarizes transactions between all possible economic units involved, in a square matrix. It is required that each activity produces a single, standardized output. Fixed input-output coefficients, is not permissible for the proportions among inputs used in a process to be varied. A linear homogenous production function requires the relations between inputs and outputs not only to be linear, which is homogenous. In the model, each column of the technological matrix represents a process in the firm's production function.