Your company has a travel policy that reimburses employees forthe “ordinary and necessary†costs of business travel. Employeesoften mix a business trip with pleasure by either extending thetime at the destination or traveling from the business destinationto a nearby resort or other personal destination. When thishappens, an allocation must be made between the business andpersonal portions of the trip. However, the travel policy isunclear on the allocation method to follow.
Consider this example. An employee obtained a business-classticket for $9,558 and traveled the following itinerary:
| From | To | Miles | One-Way Regular Fare | | Purpose |
| Chicago | Paris | 4,170 | $ | 3,720 | | Business |
| Paris | Rio de Janeiro | 5,770 | | 4,450 | | Personal |
| Rio de Janeiro | Chicago | 5,290 | | 3,100 | | Return |
|
On the date of the flights between Chicago and Paris (andreturn), a restricted round-trip fare of $4,980 was available.
Required:
a. Compute the business portion of the airfareand state the basis for the indicated allocation that isappropriate according to each of the following independentscenarios:
1. Based on the maximum reimbursement for theemployee.
2. Based on the minimum cost to thecompany.
