Reference no: EM132468151

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.)                  $9,600

Administrative and executive salaries                          4,800

Interest on resort purchase                                      3,800

Advertising                                                              600

Housekeeping                                                        2,800

Depreciation on reservations computer                           80

Room maintenance                                                    960

Carpet-cleaning contract                                             50

Contract to repaint rooms                                           480

                                                                           $23,170

                            Pine Valley                Oak Glen               Mimosa Birch         Glen           Total

Revenue (000s)         $7,350                   $10,985                 $12,170           $9,000       $39,505

Square feet              59,625                       82,350                 4 4,900            89,925       276,800

Rooms                         86                           122                    66                   174              448

Assets (000s)           $99,250                        $147,005             $77,770         $61,800          $385,825

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?