Cost Allocation for Travel Reimbursement: Your company has a travel policy that reimburses employees for the "ordinary and necessary" costs of business travel. Quite often employees will mix a business trip with pleasure either by extending the time at the destination or by traveling from the business destination to a nearby resort or other personal destination. When this happens, an allocation must be made between the business and personal portions of the trip. However, the travel policy is unclear on the allocation method to follow. Consider the following example:

An employee obtained an excursion ticket for $660 and traveled the following itinerary:

Required: Compute the business portion of the air fair and state the basis for the indicated allocation that would be appropriate according to each of the following independent scenarios:

a. Based on the maximum reimbursement for the employee.

b. Based on the minimum cost to the company.

c. What do you recommend?

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Mileage Regular Fare Purpose Salt Lake City Los Angeles 1,839 $350 Business 590 150 Personal Washington, D.C. 2,288 400 Return From Washington, D.C. Salt Lake City Los Angeles To