Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
16th Edition
ISBN: 9780134642468
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 15.35P
Revenue allocation, bundled products. Boca Resorts (BR) operates a five-star hotel with a world-class spa. BR has a decentralized management structure, with three divisions:
- Lodging (rooms, conference facilities)
- Food (restaurants and in-room service)
- Spa
Starting next month, BR will offer a two-day, two-person “getaway package” for $1,000. This deal includes the following:
| As Priced Separately | |
| Two nights’ stay for two in an ocean-view room | $ 750 ($375 per night) |
| Two spa treatments (can be used by either guest) | 300 ($150 per treatment) |
| Candlelight dinner for two at BR’s finest restaurant | 200 ($100 per person) |
| Total package value | $1,250 |
Jennifer Gibson, president of the spa division, recently asked the CEO of BR how her division would share in the $1,000 revenue from the getaway package. The spa was operating at 100% capacity. Currently, anyone booking the package was guaranteed access to a spa appointment. Gibson noted that every “getaway” booking would displace $300 of other spa bookings not related to the package. She emphasized that the high demand reflected the devotion of her team to keeping the spa rated one of the “Best 10 Luxury Spas in the World” by Travel Monthly. As an aside, she also noted that the lodging and food divisions had to turn away customers during only “peak-season events such as the New Year’s period.”
- 1. Using selling prices, allocate the $1,000 getaway-package revenue to the three divisions using:
- a. The stand-alone revenue-allocation method
- b. The incremental revenue-allocation method (with spa first, then lodging, and then food)
- 2. What are the pros and cons of the two methods in requirement 1?
- 3. Because the spa division is able to book the spa at 100% capacity, the company CEO has decided to revise the getaway package to only include the lodging and food offerings shown previously. The new package will sell for $800. Allocate the revenue to the lodging and food divisions using the following:
- a. The Shapley value method
- b. The weighted Shapley value method, assuming that lodging is three times as likely to sell as the food
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Chapter 15 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
Ch. 15 - Prob. 15.1QCh. 15 - Describe how the dual-rate method is useful to...Ch. 15 - How do budgeted cost rates motivate the...Ch. 15 - Give examples of allocation bases used to allocate...Ch. 15 - Why might a manager prefer that budgeted rather...Ch. 15 - To ensure unbiased cost allocations, fixed costs...Ch. 15 - Prob. 15.7QCh. 15 - What is conceptually the most defensible method...Ch. 15 - Distinguish between two methods of allocating...Ch. 15 - What are the challenges of using the incremental...
Ch. 15 - Prob. 15.11QCh. 15 - What is one key way to reduce cost-allocation...Ch. 15 - Describe how companies are increasingly facing...Ch. 15 - Distinguish between the stand-alone and the...Ch. 15 - Identify and discuss arguments that individual...Ch. 15 - Single-rate versus dual-rate methods, support...Ch. 15 - Single-rate method, budgeted versus actual costs...Ch. 15 - Dual-rate method, budgeted versus actual costs and...Ch. 15 - Support-department cost allocation; direct and...Ch. 15 - Support-department cost allocation, reciprocal...Ch. 15 - Direct and step-down allocation. E-books, an...Ch. 15 - Reciprocal cost allocation (continuation of...Ch. 15 - Allocation of common costs. Evan and Brett are...Ch. 15 - Allocation of common costs. Gordon Grimes, a...Ch. 15 - Revenue allocation, bundled products. Couture Corp...Ch. 15 - Allocation of common costs. Jim Dandy Auto Sales...Ch. 15 - Single-rate, dual-rate, and practical capacity...Ch. 15 - Prob. 15.28PCh. 15 - Fixed-cost allocation. Central University...Ch. 15 - Allocating costs of support departments; step-down...Ch. 15 - Support-department cost allocations;...Ch. 15 - Common costs. Tate Inc. and Booth Inc. are two...Ch. 15 - Prob. 15.33PCh. 15 - Support-department cost allocations;...Ch. 15 - Revenue allocation, bundled products. Boca Resorts...Ch. 15 - Support-department cost allocations; direct,...
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