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Woodland Hotels Inc operates four resort hotels in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort Pine Valley Oak Glen Mimosa

Woodland Hotels, Inc., operates four resort hotels 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 its four hotels according to the annual revenue it generated. For the current year, these costs (000s omitted) were as follows: These are pertinent data relating to the four hotels: Required 1. Based on annual revenue, what amount of the central office costs are allocated to each hotel? What are the shortcomings of this allocation method? 2. Suppose that the current method 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 hotel, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools? 3. Using the cost pool system, how much of the central office costs would be allocated to each hotel? Is this system preferable to the single-allocation base system used in requirement 1? Why or why not?

Apr 06 2020 View more View Less

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