Alex, Mark, John, and Jason met during freshman orientation in college. They bonded almost instantly and became very good friends. During their junior year, they found a four-bedroom house for rent in a quiet residential neighborhood near their school. Alex found the house and signed the lease, fully anticipating that the others would be glad to room with him. As the first person in, Alex chose for himself the only bedroom with an attached bath. Drawing straws for the other three rooms, Mark got the room with the best view and John got the largest room. The friends then started to figure out how they would handle the various expenses associated with living in a house. They wanted an equitable basis for allocating the rent and utilities (electricity, water, and cable TV; each has his own cell phone). In addition, they wanted to figure out a way to allocate food expenses as they anticipated cooking at home.

Required:
a. Discuss three ways that the friends could allocate the rental cost among themselves.
What are the costs and benefits of each method?
b. Would you recommend that the friends choose different allocations for the different expenses? Justify your answers by indicating the change in the circumstances that triggers the need for a change in the allocation procedure.