Question

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 $9,587 and traveled the following itinerary: TO From Chicago Paris Rio de Janeiro One-Way Regular Fare $ 3,560 4,260 3,340 Miles 4,140 5,700 5,320 Paris Rio de Janeiro Chicago Purpose Business Personal Return On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,900 was available. Required: a. Compute the business portion of the airfare and state the basis for the indicated allocation that is appropriate according to each of the following independent scenarios: 1. Based on the maximum reimbursement for the employee. Business portion of the airfare 2. Based on the minimum cost to the company. Business portion of the airfare

Answer 1

Solution 1. Based on the maximum neembursement for the employee? sd, Round trip Cost Total Cost of from checage to paris (356082) the trip 7120 9587

Since the total cost of the trip. the round employee trip is less than could request 7120 2. Based on the minimum cost to the Company ? 4900 would be the menemum cost to compary. The restrected round teep fare from the checago to parts allows. business class travel for International trepp.