Reference no: EM131875618
Problem - The Holiday Hotel provides a recreation center for the use of its guests and employees. Also sells memberships to people in community. There is a squash and racket ball court facility, showering facilities and a room with various exercise equipment. The courts occupy about 70% of the facility floor space, showering area 10%, exercise room 15% and admin offices 5%. In the long run the hotel could c convert unused facilities to additional lodging units for the most recent year:
1. Building depreciation and staff costs: $400,000, The depreciation charges amount to $250,000: salaries of manger and staff $150,000. Staff costs are independent o the level of activity in recreation center.
2. Depreciation on the exercise equipment that are added as demand grows: $200,000
3. Maintenance & electrical charges, variety with number of visitors $300,000
4. Laundry costs $300,000, comprising $50,000 of deprecation on machines and $250,000 of supplies costs
5. The cost of other supplied which are consumed equally by all visitors to center $200,000
During last year, there were 67,000 visits to physical center. Capacity level of each showering, exercises and court areas is estimated as 80,000, 40,000 and 25,000 visits per year.
Required:
1. What is the cost per visit to the physical center?
2. In the past, costs of the physical center were charged to the various hotel departments, guest services and outside business in ration of 50%, 40% and 10%. Idea of charging back to hotel department is to recognize the physical center in employee-related costs. Charging back to guest services is to support the calculation per guest visit at the hotel. Costs were assigned to the unit relating to membership with expectation of covering out of pockets costs under the assumption the facility was built for use of the employees and guests.
An audit of the center's use, suggest about 25.000 visits were by employees and 80% of them only showered. About 15,000 visits were by hotel guests whom all showered and used exercise room. The remaining visits were from paid members, all of whom showered and use the exercise and court facilities almost equally.
Based on this information, how should the costs of the physical center be assigned to various groups?