Reference no: EM131717272
Question - Rembrant Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant (considered as three divisions).
Below is income statement information for 2013:
|
Hotel
|
Restaurant
|
Casino
|
|
Revenues
|
$16,425,000
|
$5,256,000
|
$12,340,000
|
|
Direct costs
|
7,508,050
|
2,866,710
|
3,276,240
|
|
Division margin
|
8,916,950
|
2,389,290
|
9,063,760
|
Estimated corporate fixed overhead costs are $14,550,000 (detailed below). Historically these costs have been allocated based upon division margin (the ability to bear). Management is considering using Activity-Based Costing to assign these costs.
Below is a breakdown of the fixed corporate costs and their suggested ABC drivers:
|
Cost pool
|
Pool costs
|
Suggested driver
|
|
Advertising costs
|
$4,500,000
|
Division revenues
|
|
HR and administrative costs
|
6,000,000
|
Number of employees
|
|
Maintenance costs
|
4,050,000
|
Square feet
|
|
Total
|
$14,550,000
|
|
Using these Pool Costs, the cost driver rates for the three cost pools are given below:
|
Cost pool
|
Cost driver rate
|
|
Advertising costs
|
$25.3125 per dollar of revenue
|
|
HR and administrative costs
|
$12,000 per employee
|
|
Maintenance costs
|
$0.132271
|
These Cost-Driver Rates are based upon the following data on the three divisions:
|
Hotel
|
Restaurant
|
Casino
|
|
Floor space (square feet)
|
80,000
|
16,000
|
64,000
|
|
Number of employees
|
200
|
50
|
250
|
1. Using division margin (the historical basis for allocating corporate fixed overhead costs), what are the assigned corporate fixed overhead costs for the Hotel division (rounded to the nearest dollar)?
$6,369,250
$7,024,595
$6,474,114
$6,597,555
2. Using ABC, what amount of Advertising costs are assigned to the Hotel division (rounded to the nearest dollar)?
2,319,395
2,400,000
2,172,555
2,025,000
3. Using ABC, Using ABC, what amount of HR and administration costs are assigned to the Hotel division (rounded to the nearest dollar)?
2,319,395
2,400,000
2,172,555
2,025,000
4. Using ABC, Using ABC, what amount of maintenance costs are assigned to the Hotel division (rounded to the nearest dollar)?
2,319,395
2,400,000
2,172,555
2,025,000