Question

Sand and Sea Resorts owns and operates two resorts in a coastal town. Both resorts are located on a barrier island that is connected to the mainland by a high bridge. One resort is located on the beach and is called the Crystal Coast Resort. The other resort is located on the inland waterway which passes between the town and the mainland; it is called the Harborview Resort. Some key information about the two resorts for the current year is shown below.

	Harborview				Crystal Coast					Total
Revenue (000s)	$	3,500				$	6,500			$	10,000
Square feet		75,000					225,000				300,000
Rooms		60					140				200
Assets (000s)	$	100,000				$	400,000			$	500,000

The nontraceable operating costs of the resort amount to $4,000,000. By careful study, the management accountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $4 million could be fairly allocated to the four cost drivers as follows.

Cost Driver	Amount Allocated
Revenue	$	200,000
Square feet		100,000
Rooms		600,000
Assets (000s)		3,100,000

The Crystal Coast resort is likely to be favored in terms of a lower cost allocation under:

Answer 1

Allocated cost

Harborview - 895,000

Crystal - 3,105,000

Working attached below

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