Question

In: Accounting

Woodland Hotels Inc. operates four resorts in the heavily wooded areas of northern California. The resorts...

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.) $ 8,800
Administrative and executive salaries 4,400
Interest on resort purchase 3,400
Advertising 600
Housekeeping 2,400
Depreciation on reservations computer 80
Room maintenance 880
Carpet-cleaning contract 50
Contract to repaint rooms 440
$ 21,050
Pine Valley Oak Glen Mimosa Birch Glen Total
Revenue (000s) $ 6,150 $ 9,190 $ 10,180 $ 7,530 $ 33,050
Square feet 57,550 79,475 43,345 86,795 267,165
Rooms 86 122 66 174 448
Assets (000s) $ 95,795 $ 141,875 $ 75,075 $ 59,650 $ 372,395

Required:

1. Based on annual revenue, what amount of the central office costs are allocated to each resort?

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?

3. Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort?

Based on annual revenue, what amount of the central office costs are allocated to each resort? (Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest dollar.)

Req. 1
Pine Valley Oak Glen Mimosa Birch Glen Total
Allocated cost

Req. 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? (Enter your answers in thousands of dollars.)

Allocation Base Total
Revenue
Square feet
Number of rooms
Assets

Req. 3

Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort? (Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest dollar.)

Allocation Base Pine Valley Oak Glen Mimosa Birch Glen Total
Revenue
Square feet
Number of rooms
Assets
Total cost allocated

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