QUESTION ONE: Background The Denton Hotel and Resort is a family-run 50-room hotel situated on the shores of Lake Wakatipu, just outside Queenstown. It previously catered mainly to international travellers but following the closure of New Zealand's borders due to the COVID19 pandemic, it has had to refocus its offerings to a domestic audience. One element of these changes is to offer a functions facility for the first time. Detail Conor Denton, the Hotel's General Manager, has approached you for help with the Hotel's costing system: "I know enough about accounting to know that adding a Functions department means we need to change how we are costing our services - we currently do this by absorbing all overhead based solely on room-nights and I can see that isn't appropriate anymore - but I need advice on what to do instead." Conor provides you with the following information: - The Hotel now has two operational departments, Accommodation, which provides rooms and guest services, and Functions, which organises and supports functions, such as conferences and off-site meetings, plus three support departments, Administration, Maintenance, and Housekeeping. - The Functions department employs additional casual staff as required, but all other staff are permanent employees. - The Hotel's pricing policy is full-cost plus 20%. You have made further investigations and discovered the following: Budgeted accommodation room-nights: 12,000 Budgeted function attendee-days: 7,500 Rudceted Overheads (to he annortioned to Alloration haco Total $1,006,000 ACCY223 Page 2 of 7 This study source was downloaded by 100000799673533 from CourseHero.com on 12-11-2022 01:03:34 GMT -06:00 https//www.coursehero.com/file/91204452/ACCY223-2021-T1-Test-1-finaldocx/ You decide that the support departments costs should be apportioned to operational departments based on employee numbers for administration costs and on floor area for maintenance and housekeeping costs. Conor also gives you information on two planned conferences, asking you to prepare full cost and price information for them as an example of your proposed costing system: Required: Prepare a report to Conor Denton, General Manager of Denton's Hotel \& Resort, advising him on the Hotel's system for costing and absorbing overhead. Your report should include the following: a) An explanation of why the Hotel's current method of absorbing overhead solely on room-nights is no longer appropriate; b) An overhead analysis sheet that includes an apportionment of hotel overheads to the departments using: i. The direct method ii. The step-down method (12 Marks c) A justification of the ranking used above in part b) ii (step-down method) to apportion support department costs to the operational departments; (3 marks d) A calculation of overhead allocation rates (OARs) for the two operational departments (Accommodation and Functions) using: i. The direct method ii. The step-down method
