Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt'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 2020. You are presented with the following income statement information for 2019: (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 2019 were $14,590,000. Read the requirements. Hotel Restaurant Casino Revenues 69 $ 19,364,000 $ 5,256,000 $ 12,350,000 9,650,000 4,392,100 4,248,768 Direct costs $ 9,714,000 $ 863,900 $ 8,101,232 Segment margin Hotel Restaurant Casino Floor space (square feet) 120,000 24,000 96,000 Number of employees 160 40 200 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 in the short run (and possibly reallocating resources to other divisions) as a result of your analysis? If so, which division would you close and why? 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 50.17 % Restaurant 16.44% Casino 65.60 % Requirement 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. Allocate the indirect costs, then calculate the division operating margin in dollars and as a percentage of revenue for each segment. Begin with cost allocation based on direct costs. (Round percentages, including intermediate calculations, to two decimal places, X.XX%. Round dollar amounts to the nearest dollar. Use parentheses or a minus sign for negative amounts.) Hotel Allocated fixed overhead costs Operating margin Operating margin % Restaurant Casino % % % Rembrandt