A perspective on joint cost allocation schemes

In this study, we review joint cost allocation schemes currently available to evaluate the strength and the weakness of those schemes using the evaluation criteria introduced by previous researches. The physical measure based allocation scheme satisfies uniqueness, core, full allocation, monotonicity, and simplicity properties but not additivity, defensibility, goal congruency, and equity properties. Symmetry property is moderately supported by this scheme. This study provides practical implications as to which allocation scheme is best fitting into a particular situation. The sales value at splitoff scheme may satisfy additivity, defensibility, uniqueness, full allocation, simplicity, goal congruency, management motivation, symmetry, and simplicity properties but not core and equity properties. Monotonicity property is moderately supported by this scheme. The estimated net realizable value scheme may satisfy uniqueness, goal congruency, full allocation, and simplicity properties but does not satisfy additivity, equity, and core properties. Defensibility, management motivation, symmetry, and monotonicity properties are moderately supported by this scheme. Among Moriarity's, Louderback's, and L-M scheme, L-M scheme seems to be the best allocation scheme because L-M allocation is in the core, a strength of Louderback scheme, and has all five advantages of Moriarity's scheme. This scheme may satisfy additivity, goal congruency, management motivation, core, symmetry, equity, full allocation, and simplicity properties but not uniqueness property. In general, game theory based schemes are theoretically sound.