Design a step method to allocate and apportion hotel overheads between the cost centres and profit centres that more fairly reflects the use of overheads by profit and cost centres. Furthermore, justify the bases (cost drivers) you have implemented so that the new system can be better ‘sold’ to profit centre managers.
You have been asked to devise a more sophisticated and fairer method to allocate and apportion hotel overheads between the 4 cost centres and 4 profit centres. Furthermore, you have been asked to justify the bases you have implemented.
Below are extracts from the coming year’s projected Income Statement and data relating to the hotel’s profit and cost centres.
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