Question
Jody's Cupcake Shop and Jenny's Cakes each operate a bakery close to each other in a small town in Florida. If Jody rents ovens
Jody's Cupcake Shop and Jenny's Cakes each operate a bakery close to each other in a small town in Florida. If Jody rents ovens on her own, it will cost $32,000. If Jenny rents ovens on her own, it will cost $48,000. If they consolidate baking operations and share ovens, the total cost will be $60,000. 1. 2. Calculate Jody's and Jenny's respective cost of the shared ovens under the stand-alone cost-allocation method. Calculate Jody's and Jenny's respective cost of the shared ovens using the incremental cost-allocation method assuming (a) Jody is the primary party and (b) Jenny is the primary party. 3. Calculate Jody's and Jenny's respective cost of the shared ovens using the Shapley value method. 4. Which method would you recommend Jody and Jenny use to share the cost of the ovens? Why? Requirement 1. Calculate Jody's and Jenny's respective cost of the shared ovens under the stand-alone cost-allocation method. Jody Jenny Stand-alone Requirement 2. Calculate Jody's and Jenny's respective cost of the shared ovens using the incremental cost-allocation method assuming (a) Jody is the primary party and (b) Jenny is the primary party. Jody Jenny Incremental Jody primary user Jenny primary user Requirement 3. Calculate Jody's and Jenny's respective cost of the shared ovens using the Shapley value method. Jody Jenny Shapley Requirement 4. Which method would you recommend Jody and Jenny use to share the cost of the ovens? Why? I would recommend the It is fairer than the likely more acceptable. which Given its simplicity, the is
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