8:36 V LTE Done Exercise Cost Allocation.docx 14-18 Cost allocation to divisions. Rembrandt Hotel& Casino is situated on beautful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt's new controller, you are asked to recommend the basis to be used for allocating fixed overhead costs to the three divisions n 2012. You are presented with the following income statement information for 2011: Hotel Restaurant Casino Direct costs 9,819,260 3749,172 248,768 8091 232 Segment margin 6605740 506 828 You are also given the following data on the three divisions Hotel RestaurantCasino space (square f Number of employees 16,000 50 200 250 You are told that you may choose to allocate indirect costs based on one of the following direct costs, floor space, or the number of employees. Total fixed overhead costs for 2011 was $14,550,000. 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations in dollars and as a per- centage of revenues. 3. Discuss the results How would you decide how to allocate indirect costs to the divisions? Why? Would you recommend closing any of the three divisions (and possibly reallocating resources to other divisions) as a result of your analysis? If so, which division would you close and why