CASE 22.

1
LANDS END HOTEL
Template for this critical thinking case in MS Excel
a.

b.

CASE 22.1
LANDS END HOTEL
Template for this critical thinking case in MS Excel

Separately evaluate the points raised by each of the two managers.

Evaluation of Chamberlain's comments and recommendation.

Robert Chamberlain, manager of the hotel dinning servie makes a valid point by saying that allo
his department based on the fact that they make the most revenue affects the success of his dep
statement, it can be inferred that, not only is his department being charged more fixed costs but
if the revenue of other departments in the hotel declines. This in turn affects the overall perform
in that, since they are paying more of the cost, the actual profit realised at the end of the period
the performance of his department. Thus, the performance of his department will be understated
department, which is paying less fixed cost will be overstated.

In summary, Robert Chamberlain's comments against assigning cost to profit centers are valid.
are discussed below.
Evaluation of Mettenburgs comments and recommendations

Mettenburg also makes a valid argument against Chamberlain's suggestion that fixed cost shou
basis of square foot of space occupied. Space occupied by a department is not controlled by the
and as such, the manager does not have control over how much space the department occupies
depends on what type of work is done by the department. It is possible for a department to oper
and operate at full capacity compared to another which wll require a larger area to operate at ful
both departments can be making maximum profit but one will have to pay more since they occu
my opinion, that is unfair. Also, other fixed costs like depreciation, salaries and insurance have n
space. Making a department that occupies a bigger space pay more of these costs is unreasona

In summary, both managers make valid arguments. Both suggestions affect one department wh

Suggest an approach to allocating the hotels fixed costs among the various profit
I suggest that fixed costs and variable costs should be allocated to departments as it is directly
costs should be allocated to departments based on what was spent in producing their produts.
determine which department is doing well during a performance review.