Reference no: EM132596326

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.) $8,200

Administrative and executive salaries 4,100

Interest on resort purchase 3,100

Advertising 600

Housekeeping 2,100

Depreciation on reservations computer 80

Room maintenance 820

Carpet-cleaning contract 50

Contract to repaint rooms 410

                                  $19,460

                                   Pine Valley               Oak Glen            Mimosa          Birch Glen               Total

Revenue (000s)         $5,550                     $8,295              $9,190        $6,795                 $29,830

Square feet              55,995                      77,320             42,165          84,430                 259,910

Rooms                        86                          122                     66               174                      448

Assets (000s)               $93,210                $138,030             $73,035           $58,025            $362,300

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?