Retail stores benefit from this method as their head

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Retail stores benefit from this method as their head count is zero. Nevertheless, they too derive benefits because of increased volume and because their customers and employeeswould also use the common facilities.Balakrishnan, Sivaramakrishnan, & Sprinkle – 2eFOR INSTRUCTOR USE ONLY9-37
Equal divisionThis method is simple and easy to implement. It assumes that each household / store gets similar benefits from the park, regardless of its size.The implicit assumption is faulty. The method is also regressive in that a condo and a large store would be treated on equal footing, ignoring differences in usage and the ability to pay.Fee-based to the extent possible.This is perhaps the most equitable method because it allows the consumer to pay only for facilities used. Some costs (e.g., landscaping) still need to be allocated. All feesdo is to reduce the magnitude of the problem. Further, there may be significant administrative costs associated with designing and administering a fee-based scheme.9.66In all three instances, there is a business related and a non-business related cost and benefit. The total cost, however, is common, requiring Jean-Pierre to allocate the cost among the two purposes.For situation [a], we believe the Jean-Pierre should seek reimbursement for $5,000, the business class fare. The travel afforded him an opportunity to increase his personal enjoyment as well. This is akin to someone getting frequent flyer miles for traveling on business, and using the miles to take a vacation or obtain an upgrade. (We note that some firms have policies that appropriate the miles.) The firm did not incur incremental costs due to Jean-Pierre’s actions. If anything, there is an incremental benefit because Jean-Pierre might have been in a better state of mind when traveling with his spouse. The situation in [b] is somewhat similar to that in [a], except that Jean-Pierre couldclaim an extra $650 of reimbursement. We believe that Jean-Pierre should not seek reimbursement for the additional $350.This expense stems purely from private considerations, and the cost is accordingly not reimbursable.Reimbursable amounts in situation [c] range from a low of the coach fare ($1,800) to the entire amount ($5,000). Arguments for charging $5,000 include the idea that the firm is willing to spend that amount on Jean-Pierre, and it is really up to him as to how he spendsit. For example, many would claim the entire per-diem allowance for meals even if their actual expense were lower. On the other hand, the firm pays for business-class travel because of the conveniences it provides. Jean-Pierre would be better able to transact business if he traveled in business class. One can argue that charging $5,000 in this case is akin to taking the shuttle bus from the airport to the hotel but charging for a taxi fare.

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