David and Gary are students at Berkeley College. They share an apartment that is owned by Gary. Gary is considering subscribing to an Internet provider that has the following packages available: Package A. Internet access B. Phone services C. Internet access + phone services (a) Stand-alone (b) Incremental David primary user Gary primary user Per Month (c) Shapley $ 85 15 90 Requirement 1. Allocate the $90 between David and Gary using (a) the stand-alone cost-allocation method, (b) the incremental cost-allocation method, and (c) the Shapley value method. (Round your answers to the nearest cent.) Costs allocated to David Gary C David spends most of his time on the Internet ("everything can be found online now"). Gary 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 package is a "win-win" situation. Requirements 1. Allocate the $90 between David and Gary 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?
David and Gary are students at Berkeley College. They share an apartment that is owned by Gary. Gary is considering subscribing to an Internet provider that has the following packages available: Package A. Internet access B. Phone services C. Internet access + phone services (a) Stand-alone (b) Incremental David primary user Gary primary user Per Month (c) Shapley $ 85 15 90 Requirement 1. Allocate the $90 between David and Gary using (a) the stand-alone cost-allocation method, (b) the incremental cost-allocation method, and (c) the Shapley value method. (Round your answers to the nearest cent.) Costs allocated to David Gary C David spends most of his time on the Internet ("everything can be found online now"). Gary 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 package is a "win-win" situation. Requirements 1. Allocate the $90 between David and Gary 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:David and Gary are students at Berkeley College. They share an apartment that is owned by
Gary. Gary is considering subscribing to an Internet provider that has the following
packages available:
Package
A. Internet access
B. Phone services
C. Internet access + phone services
(a) Stand-alone
(b) Incremental
David primary user
Gary primary user
Per Month
(c) Shapley
$
85
15
90
Requirement 1. Allocate the $90 between David and Gary using (a) the stand-alone cost-allocation method, (b) the incremental cost-allocation method, and (c) the Shapley value method. (Round
your answers to the nearest cent.)
Costs allocated to
David
Gary
C
David spends most of his time on the Internet ("everything can be found online now").
Gary 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 package is a
"win-win" situation.
Requirements
1. Allocate the $90 between David and Gary 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?
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