Profit Center
The TallTree2 Hotel Casino is a 640-room resort complex featuring a full range of Nevada-style gaming with slot machines and table games. Besides the hotel and casino, it also operates four restaurants, two entertainment showrooms and three gift shops. Because of the economic environment at the time, TallTree2 wanted to improve its bottom line by launching a range of Special Events like golf tournaments, boxing matches, New Year Parties and a series of pit, keno and slot tournaments. Those special events were specifically designed to compensate for the slow periods and generate additional gaming revenues.
Terrence Wei, the new property president, feels that his department managers appear to be in conflict with each other. The managers of each department have expressed concerns when it comes to running their department under the profit center approach. Overall, complementary costs and allocated overhead included in the direct costs pose more of a problem in determining the amounts to allocate.
More specifically, the hotel manager complained about capacity constraints. It is difficult for this department to recapture all of the opportunity costs of not selling rooms at full price or even above that amount in times of high demand. The manager is required to keep 20% of the rooms in case a higher roller comes in. If a player pays for the room, it will be at the $45 discount rate and not the $139 that a walk in customer would pay. The food department is currently pricing below the community restaurants. The manager argues that he should be able to set his prices and run his department on a profitable basis. It is currently running at 15% loss and the complementary food makes up for 20% of all restaurant sales. As for the beverage division, 77% of sales are complimentary. The manager in this department is concerned about the very low prices offered. Judy Fitch, president of marketing, is concerned that the worksheet provided by Bill Martino does not reflect the
Terrence Wei, the new property president, feels that his department managers appear to be in conflict with each other. The managers of each department have expressed concerns when it comes to running their department under the profit center approach. Overall, complementary costs and allocated overhead included in the direct costs pose more of a problem in determining the amounts to allocate.
More specifically, the hotel manager complained about capacity constraints. It is difficult for this department to recapture all of the opportunity costs of not selling rooms at full price or even above that amount in times of high demand. The manager is required to keep 20% of the rooms in case a higher roller comes in. If a player pays for the room, it will be at the $45 discount rate and not the $139 that a walk in customer would pay. The food department is currently pricing below the community restaurants. The manager argues that he should be able to set his prices and run his department on a profitable basis. It is currently running at 15% loss and the complementary food makes up for 20% of all restaurant sales. As for the beverage division, 77% of sales are complimentary. The manager in this department is concerned about the very low prices offered. Judy Fitch, president of marketing, is concerned that the worksheet provided by Bill Martino does not reflect the