Woodland Hotels, Inc., operates four resort hotels in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and Birch Glen. Woodland allocates its central office costs to each of its four hotels according to the annual revenue it generated. For the current year, these costs (000s omitted) were as follows:

These are pertinent data relating to the four hotels:

Required
1. Based on annual revenue, what amount of the central office costs are allocated to each hotel? What are the shortcomings of this allocation method?
2. Suppose that the current method were replaced with a system of four separate cost pools with costs collected in the four pools allocated on the basis of revenues, assets invested in each hotel, square footage, and number of rooms, respectively. Which costs should be collected in each of the four pools?
3. Using the cost pool system, how much of the central office costs would be allocated to each hotel? Is this system preferable to the single-allocation base system used in requirement 1? Why or why not?

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Front office personnel (desk clerks.,...) Administrative and executive salaries Interest on resort purchase Advertising Housekeeping Depreciation on reservations computer Room maintenance Carpet-cleaning contract Contract to repaint rooms $8,000 4,000 3,000 Sl) 2000 80 800 50 400 $18,930 Total Central Office Costs Pine Vaey Oak Glen Mimosa Birch Glen Total Revenue (000s) Square feet $5,350 55,475 86 $92,345 $8,857$6,550 $28,752 41,77483,664 $257,512 $448 136,745$72355 $57 499 $358,944 $7,995 76,599 122 174 Assets (000s)