Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
b Benefits received. There are various ways of operationalising
the benefits received i Monthly service charge for their prime interest – Basic news for Rolf (€32), premium movies for Ilse (€25) and premium sports for Ulrich (€30). This measure captures the services available to be used by each person.
ii Actual usage by each person – This would involve having a record of viewing by each person and then allocating the €70 on a percentage viewing time basis. This measure captures the services actually used by each person.
c Ability to pay. This criterion requires three people to agree upon their relative ability to pay. One measure here would be their respective salaries with Frankfurt Fire Brigade.
d Fairness or equity. This criterion is relatively nebulous. A straightforward approach would be to split the €70 equally among the three parties.
2 Three methods of allocating the €70 are
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