Sunny Gunn, a self-employed consultant near Johor, received an invitation to visit a prospective client...
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Sunny Gunn, a self-employed consultant near Johor, received an invitation to visit a prospective client in Kuala Lumpur. A few days later, he received an invitation to make a presentation to a prospective client in Kedah. He decided to combine his visits, traveling from Johor to Kuala Lumpur, Kuala Lumpur to Kedah, and Kedah to Johor. Gunn received offers for his consulting services from both companies. Upon his return, he decided to accept the engagement in Kedah. He is puzzled over how to allocate his travel costs between the two clients. He has collected the following data for regular round-trip fares with no stopovers: Johor-Kuala Lumpur RM140 Kuala Lumpur-Kedah RM110 Gunn paid RM180 for his three-leg flight (Johor-KL-Kedah-Johor). How would Gunn allocate the RM180 airfare between the clients in KL and Kedah using (a) stand-alone cost allocation method, (b) the incremental cost-allocation method. a. Which method would you recommend Gunn use and why?
Sunny Gunn, a self-employed consultant near Johor, received an invitation to visit a
prospective client in Kuala Lumpur. A few days later, he received an invitation to make a
presentation to a prospective client in Kedah. He decided to combine his visits, traveling
from Johor to Kuala Lumpur, Kuala Lumpur to Kedah, and Kedah to Johor.
Gunn received offers for his consulting services from both companies. Upon his return,
he decided to accept the engagement in Kedah. He is puzzled over how to allocate his
travel costs between the two clients. He has collected the following data for regular
round-trip fares with no stopovers:
Johor-Kuala Lumpur RM140 Kuala Lumpur-Kedah RM110
Gunn paid RM180 for his three-leg flight (Johor-KL-Kedah-Johor). How would Gunn allocate the RM180 airfare between the clients in KL and Kedah using (a) stand-alone cost allocation method, (b) the incremental cost-allocation method.
a. Which method would you recommend Gunn use and why?
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