Coworking space has become more popular during the pandemic as entrepreneurs are searching for a "third space" to work. A "third space" is a professional, flexible and comfortable space that combines the best traits of a home, bar/lounge and office. The Centre For Social Innovation (CSI) manages four coworking spaces, each with a different owner. CSI's Managing Director, Jinn, tells you that the coworking spaces with more expensive rental rates tend to require more of their time and also the time of her limited support staff. Jinn goes into more detail about the chart numbers: The four coworking spaces incur a total annual operating expense of $7,345,733, and these operating expenses are traced directly to the coworking spaces for the purpose of determining the profit earned by the coworking owners. The annual management fee that CSI earns is based on a percentage of total annual operating expenses and is negotiated each year. For the current year, the fee rate is 6%. CSI provides you with the following information for current year average rental rates and occupancy rates: Average Occupancy Average Rent per Unit Coworking Names Units 1-CP Space 100 88% $1,895 2-WW Space 250 77% 1295 3-HR Space 200 72% 995 4-CM Space 350 82% 895 Total 900 Expenses and Fees (000s) Operating Expenses $7,345,733 Management fee @ 6% $440,744 Jinn wonders if after the pandemic, some of the coworking average rent per unit will increase as the demand by traditional employers for flexible offices grows. Jinn is worried that when people are asked to return to work that they will go instead to traditional workplaces or meet in coffee shops and this will negatively affect their average occupancy. What do you think? SOLVE AND ANALYZE: How much of the management fee would be charged to 1CP under each of the three allocation bases (number of units, average occupancy, and total annual rental revenue, respectively): 

3A. $35,765; $85,804; $106,278 3B. $48,972; $121,585; $90,050 

3C. $1,847,655; $2,440,263; $1,954,781 3D. $58,489; $117,854; $86,710 (15 marks) 

3E. Explain which allocation base you would choose and why. What ethical issues, if any, are involved in the choice of allocation base? Also give cost accounting and systems thinking advice to Jinn, the managing director, of what opporutnities, threats could lie ahead for the 4 coworking spaces based on changes you forsee after COVID pandemic ends.

Answer rating: 100% (QA)

What do you think SOL VE AND AN AL Y ZE ANS WER Based on the information that Jinn has provided it is likely that the average rent per unit for cowork ing spaces will increase after the pand emic Ther... View the full answer