Your company has a travel policy that reimburses employees for the "ordinary and necessary" costs of business travel. Employees often mix a business trip with pleasure by either extending the time at the destination or 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 this example. An employee obtained a business-class ticket for $9,545 and traveled the following itinerary.

FromToMilesOne-Way Regular FarePurposeChicagoParis4,070$3,740BusinessParisRio de Janeiro5,7804,350PersonalRio de JaneiroChicago5,3103,190Return

On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,850 was available.

Required:

a.Compute the business portion of the airfare according to each of the following independent scenarios:

1.Based on the maximum reimbursement for the employee.

2.Based on the minimum cost to the company.