Problem:
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 $9,590 and traveled the following itinerary:
One-Way
From To Miles Regular fare Purpose
Chicago Paris 4,080 $3,690 Business
Paris Rio de Janeiro 5,760 4,310 Personal
Rio de Janeiro Chicago 5,340 3,150 Return
A restricted round-trip fare of $4,880 was available on these dates.
Required:
Compute the business portion of the airfare according to each of the following independent scenarios (Omit the "$" sign in your response):
(a) Based on the maximum reimbursement for the employee.
(b) Based on the minimum cost to the company.