Sand and Sea Resorts Owns and Operates Two Resorts in a Coastal

question 12

Multiple Choice

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. $\begin{array}{ll}&\text { Harborview } & \text { Crystal Coast } & \text { Total }\\\text { Revenue }(000 \mathrm{~s}) & \$ 3,500 & \$ 6,500 & \$ 10,000\\\text { Square feet } & 75,000 & 225,000 & 300,000 \\\text { Rooms } & 60 & 140 & 200\\\text { Assets }(000 \mathrm{~s}) &\$ 100,000 & \$ 400,000 &\$ 500,000\end{array}$

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.
$\begin{array}{lr}\text { Cost Driver } & \text { Amount Allocated } \\\text { Revenue } & \$ 200,000\\\text { Square feet } & 100,000 \\\text { Rooms } & 600,000 \\\text { Assets }(000 \mathrm{~s}) & 3,100,000\end{array}$ What is the operating profit of the Crystal Coast Resort, using revenue as an allocation base?

• A) $2,200,000.
• B) $1,650,000.
• C) $3,500,000.
• D) $4,550,000.
• E) $3,900,000.

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Definitions:

Partnership Dissolution

The formal termination of a partnership agreement, leading to the distribution of assets and settlement of debts among partners.

Partnership Debts

Financial obligations for which all partners in a business partnership are jointly and severally responsible, regardless of an individual partner's contribution to the debt.

Adjudicated Bankrupt

Adjudicated bankrupt refers to an individual or entity legally declared insolvent by a court, having their assets liquidated or reorganized to pay off creditors.

Operation of Law

Changes in rights or obligations that occur automatically due to legal rules, rather than the actions of a person or agreement.