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Section 3 Cost allocation Penny King, the owner of the Flying Crown Hotel asks you for help in analyzing the results of operations for the

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Section 3 Cost allocation Penny King, the owner of the Flying Crown Hotel asks you for help in analyzing the results of operations for the various areas of her hotel and has provided you with the followin information Flying Crown Hotel Income Statement For the year ended December 31, 2016 Gift Shop Total Rooms Food Revenue $2,000 $1,002,000 1,000 181,000 400 250,400 85,100 $500 485,500 $500,000 S500,000 180,000 130,000 45,000 $145,000 Cost of goods sold 0 Payroll& related exp 120,000 Other direct exp. 100 Departmental income $340,000 Undistributed expenses: Administrative & general 90,000 70,000 Sales & marketing Property oper. Maintenance & Utilities Insurance Depreciation Total undistributed expenses Income before taxes 70,000 10,000 80,000 320,000 165,500 Income taxes 50,000 $115,500 Indirect expenses should be allocated based on departmental headcount, which is as follows: 70 0.5 Rooms: Food Gift shop 125.5

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