Problem
Sand and Sea Resorts own and operate two resorts in a coastal town. Both resorts are located on abarrier island that is connected to the mainland by a high bridge. One resort is located on the beach and iscalled the Crystal Coast Resort. The other resort is located on the inland waterway, which passes betweenthe town and the mainland; it is called the Harborview Resort. Some key information about the tworesorts for the current year is shown below.
|
|
Harborview
|
Crystal Coast
|
Total
|
|
Revenue (0003)
|
$3,500
|
$6,500
|
$10,000
|
|
Square feet
|
75,000
|
225,000
|
300,000
|
|
Rooms
|
60
|
140
|
200
|
|
Assets (000s)
|
$100,000
|
$400,000
|
$500,000
|
|
Revenue/room
|
$90
|
$120
|
|
The nontraceable operating costs of the resort amount to $4,000,000. By careful study, the managementaccountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $4million could be fairly allocated to the four cost drivers as follows.
|
Cost Driver
|
Amount Allocated
|
|
Revenue
|
$200,000
|
|
Square feet
|
100,000
|
|
Rooms
|
600,000
|
|
Assets (000s)
|
3,100,000
|
Require:
Using the information regarding the allocation of the $ 4 million to the four cost drivers, determine the amount of cost to be allocated to each resort.