Design a step method to allocate and apportion hotel overheads between the cost centres and profit centres that more fairly reflects the use of overheads by profit and cost centres. Furthermore, justify the bases (cost drivers) you have implemented so that the new system can be better sold to profit centre managers.

You have been asked to devise a more sophisticated and fairer method to allocate and apportion hotel overheads between the 4 cost centres and 4 profit centres. Furthermore, you have been asked to justify the bases you have implemented.

Below are extracts from the coming years projected Income Statement and data relating to the hotels profit and cost centres.

Undistributed (indirect) Expenses marketing property operation & maintenance human resources admin & general Insurance electricity Depreciation 310,000 1,350,000 1,660,000 340,000 1,140,000 1,480,000 70,000 115,000 185,000 190,000 630,000 820,000 0 610,000 610,000 0 630,000 630,000 0 1,240,000 1,240,000 6,625,000 -6,625,000 Income Before Tax Income Tax Net Income % rooms food spa gift shop marketing POM A&G HR foxed assets % 5,000,000 2,200,000 1,100,000 50,000 260,000 1,950,000 550,000 350,000 11,460,000 43.63 19.20 9.60 0.44 2.27 17.02 4.80 3.05 100.00 area % 6,200 800 400 80 100 180 90 80 78.18 10.09 5.04 1.01 1.26 2.27 1.13 1.01 100.00 employees % 47 42 10 2 5 8 4 2 120 revenue 39.17 35.00 8.33 1.67 4.17 - 6.67 - 3.33 1.67 100.00 POM work orders % 60% 3900 22% 900 17% 600 1% 15 16 87 56 32 100% 5606 69.57 16.05 10.70 0.27 0.29 1.55 1.00 0.57 100.00 7,930