Evan and Brett are students at Berkeley College. They share an apartment that is

Question

Evan and Brett are students at Berkeley College. They share an apartment that is owned by Brett who is considering subscribing to an Internet provider that has the following packages available: Package Per Month A. Internet access $75 B. Phone services $25 C. Internet access + phone services $90 Evan spends most of his time on the Internet (“everything can be found online now”). Brett prefers to spend his time talking on the phone rather than using the Internet (“going online is a waste of time”). They agree that the purchase of the $90 total pack age is a “win – win” situation. Answer the following questions: 1. Allocate the $90 between Evan and Brett, using (a) the stand - alone cost - allocation method, (b) the incremental cost - allocation method, and (c) the Shapley value method. 2. Which method would you recommend they use and why?

Explanation / Answer

1.

a. Stand alone cost allocation method

b. The incremental cost allocation method

The incremental cost allocation method may generate some disputes over the ranking.

C. The shapely metod - average over cost allocation as the primary and incremental cost allocation.

Evan=(65+75)÷2=70

Brett=(25+15)÷2=20

2..

The shapely value method is preferred it avoids disputes about who is the primary user it consider each user as a primary user and average the results the stand alone method ignore information regarding primary users

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.