Question

Four local businesses; a boat cruise company, a local hotel, a restaurant, and an ice-cream stand, have decided to offer a special “night on the Rideau” for $250 per couple. “Night on the Rideau includes: dinner, a boat cruise, ice cream and a night at a hotel.

If purchased separately, this offer could cost $315 (hotel $150, boat cruise $50, restaurant $110, ice cream $5).

Required

1. Allocate the revenue of $250 between the three local businesses using the stand alone method.

2. Allocate the revenue of $250 between the three local businesses using the incremental revenue. Assume the order of preference is as follows:

1. Restaurant
2. Ice Cream
3. Boat Cruise
4. Hotel

Answer 1

Allocation of Revenue under Stand Alone method Percentage = Separate revenue/total *100 Share of revenue under stand alone method in $ = Joint revenue * Joint Revenue = 250$ respective % Four Local Business Separate revenue in $ Boat Cruise company 16% 250 40 Local hotel 150 48% 250 119 Restaurent 110 35% 250 250 ice cream stand 2% TOTAL 250 Allocation of revenue under incremental revenue method Revenue Allotment Revenue remaining to allot in $ Four Local Business Separate revenue in $ Revenue remaining to allot Restaurent 50 $250-Revenue alloted i.e $50 200 Revenue remaining to allot - revenue alloted = 200-150 ice cream stand 150 150 Boat Cruise company 110 50 Local hotel 315 250