Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 54

Jet Green Airways historically distributes the indirect costs of lost and damaged baggage to its three major hubs using a basis of annual number of flights in and out of each hub. Last year $667,500 was distributed as follows: The airline's baggage management director suggests that an allocation on the basis of baggage traffic, not flights, will better represent the distribution, primarily based on the fact that the high fees now charged to passengers to check luggage have significantly changed the number of bags handled at the major hubs. Total number of bags handled during the year are 2,490,000 at DFW, 1,582,400 at YYZ, and 763,500 at MEX.
Using the baggage-traffic basis, determine the allocation rate using last year's total of $667,500, and distribute this amount to the hubs this year.