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Case Analysis

1029 words - 5 pages

Crystal Coast Ocean Resort

The Crystal Coast Ocean Resort (CCOR) is a large, family-owned resort located on one of the finest beaches in North Carolina. The Resort is locally called the “Ramada Inn: Crystal Coast Ocean Resort”, because it has a contractual relationship with Ramada Inn, Inc which requires Ramada to provide reservation services and certain marketing services. In turn CCOR pays an annual fee to Ramada and displays the Ramada Inn sign. Ramada has the right, under contract, to require CCOR to meet Ramada standards for resort services, cleanliness, etc, and regularly visits CCOR to make sure that these standards are being met. CCOR’s main building has a ...view middle of the document...

Because the Resort is popular with families, the average number of persons per room is greater than for some other motels or hotels. The average number of occupants is three for the ocean front, ocean view, and pool side rooms, four for the one bedroom suite, and 6 for the two bedroom suite. The suite are also somewhat larger, 500 square feet for the one bedroom suite, and 900 square feet for the two bedroom suite, while all other room are 300 square feet.

CCOR does not have some of the amenities of competing resorts, but instead competes on value pricing and reliable service. It does not offer special services such as room service, exercise room, restaurant, or lounge but it sets high standards for room cleanliness and for the appearance and cleanliness of the pool and grounds. Also, CCOR offer a free breakfast and a free afternoon snack.

Because of high demand in summer months, CCOR sets relatively high market prices during this season, ranging from $125 to $350 per room depending on room type and day of week. Prices are lower in the fall and spring, and substantially lower in the winter. In order to have better information about price setting and profitability analysis for each of the five room types: ocean front, ocean view, pool side, one bedroom and two bedroom suites, CCOR has gathered additional information to help it determine the cost for each occupied room. Les Broom, the accounting manager, assembled the following data. The data includes information on the four annual resource costs taken directly from CCOR’s accounting reports, as well as activity and cost driver information developed by Les.

Annual Resource Costs at CCOR
[pic]

The following is a list of the nine activities at CCOR identified by Les, as well as information he developed to assign resource costs to these activities. Les performed a careful analysis and determined the approximate percentage of each type of resource costs that could be allocated to each of the nine activities.
[pic]
The following activity-consumption cost drivers are used to assign activity costs to cost objects:
|Activities |Cost Driver | |
|Housekeeping |square feet | |
|Laundry |number of occupants |
|Grounds and Pool |number of rooms | |
|Registration ...

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