Basic Management Accounting Concepts
TropicalSpa is a full-service spa offering tanning, massages, and hair and nail care services. The tanning area provides only tanning services and consists of three tanning booths, a waiting area with several chairs, and a desk for the tanning supervisor. Suppose that the tanning area is the cost object. Assume that all or a portion of the following costs must be assigned to the tanning area.
a. Salary of the tanning supervisor
b. Electricity for the TropicalSpa building in which the tanning area is located
c. Disinfectant spray and wipes to clean the tanning equipment after each client use
d. Maintenance for the tanning equipment, arranged through a monthly maintenance contract with the equipment manufacturer's local representative
e. Cost of the weekly custodial services arranged by TropicalSpa for the building
f. Salary of the receptionist at the entrance to TropicalSpa
g. Purchase of flowers given to employees on their birthday
h. Depreciation on tanning equipment
i. Cost of insurance rider taken to cover increased liability due to tanning services
j. Cost of advertising on local radio stations for TropicalSpa services
k. Cost of telephone equipment and services for TropicalSpa
l. Plastic pump bottles and aloe lotion that are provided in each tanning booth
m. Property tax on the TropicalSpa building and land
Required
Identify which cost assignment method would most likely be used to assign the costs of each activity to the tanning area: direct tracing, driver tracing, or allocation. When driver tracing is selected, identify a potential driver that could be used for the tracing.