=+6-24 KK Cost allocation to divisions OBJECTIVE 2 Wilderness Hotel & Casino is situated near the beautiful Cradle Mountain in Tasmania. The complex includes a 300-room hotel, a casino and a restaurant. As Wilderness Hotel’s new management accountant, you are asked to recommend the basis to be used for allocating fixed overhead costs to the three divisions in 2014. You are presented with the following income statement information for 2013:

Hotel Restaurant Casino Revenues $16 425 000 $5 256 000 $12 340 000 Direct costs 9 819 260 3 749 172 4 248 768 Segment margin $6 605 740 $1 506 828 $8 091 232 You are also given the following data on the three divisions:

Hotel Restaurant Casino Floor space (square metres) 7432 1486.4 5945.6 Number of employees 200 50 250 You are told that you may choose to allocate indirect costs based on one of the following: direct costs, square metres or the number of employees. Total fixed overhead costs for 2013 were $14550000.

Required 1 Calculate division margins in percentage terms before allocating fixed overhead costs.