Companies often set predetermined overhead rates to assign overhead costs to products and services. In such cases, a set amount is applied to product cost for each actual unit of ‘‘predictor’’ or ‘‘driver’’ activity incurred. Following are some overhead costs that would be incurred in an all-inclusive hotel (includes a restaurant, pool, spa, fitness facility, meeting rooms, ballroom, and business center).
• Salary of concierge
• City property taxes
• Wages for housekeeping staff
• Electricity
• Wages for table cleaners (bus staff)
• Internet provider cost
• Unemployment taxes
• Water bill for spa
• Cleaning supplies
• Liability insurance for fitness facility
• Liquor license fee
• Laundry services
• Food costs
• Insurance policy
Required:
(a) For each of the listed items, indicate three items that could be considered causal factors of the overhead cost. For instance, one predictor of cleaning supplies could be the number of rooms cleaned.
(b) Each hotel room has a phone. The monthly cost of phone service to the hotel is $8,400 plus long-distance charges; this rate has not changed in three years. Why might the hotel charge customers an ‘‘access’’ fee of $2 per call for every call made to outside the hotel? Why might this fee have increased from the $1 charged three years ago?