An algorithm for activity based costing based on matrix multiplication

Activity based costing (ABC) is a costing methodology particularly suitable to deal with manufacturing complexity and diversity. However, an ABC system is still considered a complex and relatively costly method to be implemented. In this paper we present a powerful algorithm for activity based costing based on matrix multiplication. With regard to the use of matrixes and linear algebra, some researchers in the 1960s and 1970s studied cost allocation linking matrix and linear algebra with Leontief´s input-output model (e.g. and). The algorithm presented here is an important development, in so far as it is an effective approach to compute product costs and because it offers a simple and flexible algorithm for the design of product costing software.