Linear Algebra for the Neophyte.

Abstract In the October 1964, issue of the journal "The Accounting Review," professor Neil Churchill presented four applications of matrix algebra in cost allocation situations. Where functional relationships between allocation sources and destinations are determinable and stable, linear algebra is shown to be a convenient tool for getting the cost allocation job done. Churchill presents a technique that is finding increasing use as accountants become more experienced with formulative methods. However, the artful economy of wording and symbolism that makes his presentation compact is also a source of frustration for one who bootstraps his way to an understanding of such matters. As long as the allocating relationships and proportions remain stable, Churchill's foreshortened approach works very well. The same matrix approach can be expanded to allocations of larger dimension, and of more than one layer. While the problem appears frightening when viewed in its entirety, a step-by-step venture through it will lead eventually to placement of all costs in the service using departments. The utility of such allocations, from a cost-control viewpoint, can be questioned, but that is an entirely different question with which researchers do not propose to engage here.