18-41 on of Central Costs; Profit Centers Woodland Hotels, Inc., operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each generates. For the current year, the central office costs (000s omitted) were as follows: of the four resorts according to the annual revenue the resort $-8,000 4,000 3,000 600 2,000 80 800 50 400 $18,930 Front office personnel (desk, clerks, etc.) Administrative and executive salaries Interest on resort purchase Advertising Housekeeping Depreciation on reservations computer Room maintenance Carpet-cleaning contract Contract to repaint rooms Pine Valley Oak Glen Mimosa Birch Glen Total Revenue (000s) $5,350 S7,995 S8,857 $6,550 $28,752 Square feet Rooms 55,475 76,599 41,774 83,664 257,512 66 86 122 174 448 Assets (000s) $92,345 $136,745 $72,35S $57,499 S358,944 Required 1. Based on annual revenue, what amount of the central office costs are allocated to each resort? What are the shortcomings of this allocation method? 2. Suppose that the current method were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each resort, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools? Using the cost pool system in requirement 2, how much of the central office costs would be allocated to each resort? Is this system preferable to the single-allocation base system used in requirement 1? Why or why not? 3