Martini Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Martini's new controller, your manager asks you to recommend the basis the hotel should use for allocating fixed overhead costs to the three divisions in 2017. You are presented with the following income statement information for 2016:

Revenues	$16,925,000	$7,936,000	$12,420,000
Direct costs	9,850,000	4,392,100	4,226,000
Segment margin	$7,075,000	$3,543,900	$8,194,000

You are also given the following data on the three divisions.

	Hotel	Restaurant	Casino
Floor space (square feet)	110,000	22,000	88,000
Number of employees	320	80	400

You are told that you may choose to allocate indirect costs based on one of the following: direct costs, floor space, or the number of employees. Total fixed overhead costs for 2016 were $14,650,000.

Use this chart to solve for the following (a) (b) and (c) :

Hotel, Restaurant, Casino, Martini

Allocated Fixed Overhead Costs

Operating Margin

Operating Margin %

(a) cost allocation based on direct costs

(b) allocate costs based on floor space

(c) allocate costs based on number of employees