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A regional director of marketing allocated their $12,000 per month salary to three properties that they are responsible for. The allocation is based upon each property's room count. Hotel A has 450 rooms. Hotel B has 375 rooms. Hotel C has 550 rooms. How much of the regional marketing director's monthly salary will be charged to Hotel C? A. $3,925 B. $3.275 C. $4,000 D. $4,800 Data Assume that you are the individual responsible for making cost allocation decisions for the Harley Hotel Company. How would you assign the costs related to your company employing a director of operations and a corporate sales director? Certainly, one logical approach, which appears to be quite fair, would be to assign each hotel an equal amount of this corporate overhead. If such an approach were used, the cost allocation to each hotel would be computed as Total overhead Number of profit centers Overhead per profit center Unknown node type: span or $350,000 5 = $70,000 per hotel Another approach would be to assign overhead costs on the basis of each hotel's size as measured by its number of rooms. The logic to such an approach would be that a larger hotel (in this example, the 525-room Sandstone) would likely require more attention from the corporate office staff than would a smaller property (the 200-room Los Cobo). Utilizing such a room-size-based approach, the overhead costs would be allocated in the same percentage ratio as each hotel's size as shown in Figure 9.10. Hotel Rooms % of Total Rooms $ of Overhead Charge Bitmore 300 20.0 70,000 Los Cobo 200 13.3 46,550 The Drake 225 15.0 52,500 Greenwood 250 16.7 58,450 Sandstone 525 35.0 122,500 Total 1,500 100.0 350,000 FIGURE 9.10 Overhead allocation based on number of rooms Note that, under this plan, overhead allocation charges, rather than being equal, range from a low of $46,550 (Los Cobo Hotel) to a high of $122,500 (Sandstone Hotel). Clearly, this approach yields very different results than does one that allocates the company's overhead costs based upon the number of hotels managed ($70,000 per hotel). Yet, another approach that could be taken to allocate the Harley's overhead costs, and one that is commonly used by restaurant and hotel companies, is that of allocation based on the percent of company revenue achieved by the profit center. Using this approach, the data for the Harley Hotel company would result in the allocation charges shown in Figure 9.11. Which is an example of a non-controllable cost? A. Housekeeping salaries B. Linen cost per occupied room C. Laundry equipment depreciation D. Housekeeping wages Which formula is used to calculate variable cost per guest (VC/Guest)? A. Total variable costs / number of guests B. Total semi-variable costs / Number of guests C. Number of guests / Total variable costs D. Number of guests/Total semi-variable costs