Although the business plan of the hotel forecasted losses for 2007, actual results were below expectations....

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Although the business plan of the hotel forecasted losses for 2007, actual results were below expectations. In order to identify sources of problems, the entrepreneurs requested a profitability analysis for the three main services offered by the hotel. Cristina Aranda, the cost analyst of one of the allied firms and the person in charge of budget and control for the Terminus Hotel, teamed up with General Manager Claudia Santander to identify some cost categories (see Table 3). TABLE 3 COMMON COSTS FOR ACCOMMODATION, RESTAURANT AND ENTERTAINMENT (EUROS) Service 2007 General Management Administrative Support Housekeeping Laundry Security Maintenance TOTAL QUESTION TABLE 6 ALLOCATING COMMON COSTS BY USING MULTIPLE COST ALLOCATION BASES Common cost Financing, Maintenance Accounting and Taxation, Reservation Center, Advertising, Law, General Management, Admin. Gardening, Housekeeping, Security Receivables, Laundry 55,000 15,000 95,000 325,000 100,000 110,000 700,000 Cost allocation basis Value of property, plant and equipment Number of employees Number of square meters Revenues 2. Using Claudia's multiple cost allocation bases, report services profitability. Comment on the rationale of the proposal. Although the business plan of the hotel forecasted losses for 2007, actual results were below expectations. In order to identify sources of problems, the entrepreneurs requested a profitability analysis for the three main services offered by the hotel. Cristina Aranda, the cost analyst of one of the allied firms and the person in charge of budget and control for the Terminus Hotel, teamed up with General Manager Claudia Santander to identify some cost categories (see Table 3). TABLE 3 COMMON COSTS FOR ACCOMMODATION, RESTAURANT AND ENTERTAINMENT (EUROS) Service 2007 General Management Administrative Support Housekeeping Laundry Security Maintenance TOTAL QUESTION TABLE 6 ALLOCATING COMMON COSTS BY USING MULTIPLE COST ALLOCATION BASES Common cost Financing, Maintenance Accounting and Taxation, Reservation Center, Advertising, Law, General Management, Admin. Gardening, Housekeeping, Security Receivables, Laundry 55,000 15,000 95,000 325,000 100,000 110,000 700,000 Cost allocation basis Value of property, plant and equipment Number of employees Number of square meters Revenues 2. Using Claudia's multiple cost allocation bases, report services profitability. Comment on the rationale of the proposal.

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ANS WER Using Claudia s multiple cost allocation bases the profitability of each service can be dete... View the full answer