Taylor Inc. and Victor Inc. are two small clothing companies that are considering leasing a dyeing machine together. The companies estimated that in order to meet production, Taylor needs the machine for 600 hours and Victor needs it for 400 hours. If each company rents the machine on its own, the fee will be $ 60 per hour of usage. If they rent the machine together, the fee will decrease to $ 54 per hour of usage.
1. Calculate Taylor’s and Victor’s respective share of fees under the stand-alone cost-allocation method.
2. Calculate Taylor’s and Victor’s respective share of fees using the incremental cost-allocation method. Assume Taylor to be the primary party.
3. Calculate Taylor’s and Victor’s respective share of fees using the Shapley value method.
4. Which method would you recommend Taylor and Victor use to share the fees?