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: (Click the icon to view the data.) You are also given the following data on the three divisions. (Click the icon to view the data.) 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 $14,580,000. Read the requirements Requirement 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs. (Round your answers to two decimal places, X.XX.) Division margin Hotel Restaurant Casino % % Data Table Hotel Restaurant Casino Revenues $ Direct costs 17,592,000 $ 9,750,000 7,842,000 $ 5,520,000 $ 3,964,800 1,555,200 $ 12,370,000 4,624,900 7,745,100 Segment margin Data Table Print Done Floor space (square feet) Number of employees Hotel Restaurant 125,000 25,000 280 70 Casino 100.000 350 Requirements Print Done X X 1. Calculate division margins in percentage terms prior to allocating fixed overhead costs. 2. Allocate indirect costs to the three divisions using each of the three allocation bases suggested. For each allocation base, calculate division operating margins after allocations, in dollars and as a percentage of revenues. 3. Discuss the results. How would you decide how to allocate indirect costs to the divisions? Why? 4. Would you recommend closing any of the three divisions (and possibly reallocating resources to other divisions) as a result of your analysis? If so, which division would you close and why? Print Done X A Hotel Restaurant Casino Revenues Directs costs Segment margin Fixed costs Income before taxes Division margin % $17,592,000.00 $5,520,000.00 $12,370,000.00 $35,482,000.00 $ 9,750,000.00 $3,964,800.00 $ 4,624,900.00 $18,339,700.00 $ 7,842,000.00 $1,555,200.00 $ 7,745,100.00 $17,142,300.00 $ 14,580,000.00 $ 2,562,300.00