Assume that you are living in Dar Es Salaam, Tanzania and your friend, Safari in Rwanda...

4.5 Ratings (615 Votes)

1. Stand-Alone Cost-Allocation Method

Party	Costs Allocated
Safari:	{(1200)/(1,200 + 800)}* 1,500 = 0.601,500=$900*
Mukai:	{(800)/($1,200 + $800)} * 1,500 = 0.40 1,500 = $600*
Total	$1,500


2. Incremental cost-allocation method

Party	Costs Allocated
Safari (primary)	$1,200
Mukai (incremental)	($1,500 – $1,200) = $300
Total	$1,500


3.The shapley value method of allocating common costs

a. Safari as Primary party
Party	Costs Allocated
Safari (primary)	$1,200
Mukai (incremental)	($1,500 – $1,200) = $300
Total	$1,500

b. Mukai as Primary party
Party	Costs Allocated
Mukai (primary)	$800
Safari (incremental)	($1,500 – $800) = $700
Total	$1,500

The shapley value method of allocating common costs = Calculating Average of (a) and (b)
Party	Average of (a) and (b) = Costs Allocated
Safari:	($1200+ $700)/2 = $950
Mukai:	($300 + $800)/2 = $550
Total	$1,500

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