Reference no: EM132566950

Woodland Hotels Inc. operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each of the four resorts according to the annual revenue the resort generates.

For the current year, the central office costs (000s omitted) were as follows:

Front office personnel (desk, clerks, etc.) $ 10,000

Administrative and executive salaries 5,000

Interest on resort purchase 4,000

Advertising 600

Housekeeping 3,000

Depreciation on reservations computer 80

Room maintenance 1,000

Carpet-cleaning contract 50

Contract to repaint rooms 500

Total $ 24,230

                           Pine Valley              Oak Glen          Mimosa           Birch Glen          Total

Revenue (000s)    $ 7,750                 $ 11,580           $ 12,830        $ 9,490         $ 41,650

Square feet          60,660                   83,735             45,655            91,455        281,505

Rooms                   86                         122                     66              174            448

Assets (000s)        $ 100,975              $ 149,485            $ 79,080      $ 62,855        $ 392,395

Required:

Question 1. Based on annual revenue, what amount of the central office costs are allocated to each resort?

Question 2. Suppose that the current methods were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each resort, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools?

Question 3. Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort?