Reference no: EM132930307

Sand and Sea Resorts owns and operates two resorts in a coastal town. Both resorts are located on a barrier island that is connected to the mainland by a high bridge. One resort is located on the beach and is called the Crystal Coast Resort. The other resort is located on the inland waterway which passes between the town and the mainland; it is called the Harborview Resort.

Some key information about the two resorts for the current year is shown below.
 
                                           Harborview                 Crystal               Coast

Total Revenue (000s)                  $3,700                   $6,300               $10,000

Square feet                                 80,000                   240,000                320,000

Rooms                                         63                           150                           213

Assets (000s)                              $110,000                    $420,000                     $530,000
 
The nontraceable operating costs of the resort amount to $4,000,000. By careful study, the management accountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $4 million could be fairly allocated to the four cost drivers as follows.

Cost Driver Amount Allocated

Revenue$200,000

Square feet 100,000

Rooms 520,000

Assets (000s) 3,180,000

Problem 1: What is the operating profit of the Crystal Coast Resort, using revenue as an allocation base?

Multiple Choice

Option 1: $1,599,000.

Option 2: $4,410,000.

Option 3: $3,780,000.

Option 4: $3,392,000.

Option 5: $2,132,000.