Chilton Day School allocates marketing and administrative costs to its three schools based on total annual tuition revenue for the schools. Last year the allocations (000s omitted) were as follows:

In the current year the middle and high schools experienced no change in revenues, but the pre-school's tuition revenue increased to $1.9 million. Marketing and administrative costs rose to $1,250,000.
Pre-School tuition revenue in the current year.......................1900
Marketing and Admin. Costs in the current year.....................1250
Required
1. Using revenue as an allocation base, how should the costs be allocated for the current year?
2. What are the shortcomings of this allocation formula?

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Pre-SchoolMiddle School High School Total $1,500$1,800 $2200$5500 $125 $500 $1,000 Tuition revenue