COST ALLOCATION AT SELLONE MALL

Background
SellOne Mall is located at a prominent location on city’s main street and is frequented by
the city’s upwardly mobile population. The 9 storied mall consists of 3 floors dedicated to
parking and over 3,50,000 square feet of retail space which houses several renowned
brands like Adidas, Cookie-Man, Crossword, fabindia, Hard Rock Café, INOX, KFC,
Neeru’s, Shoppers Stop, Subway, etc.

The Organization
The mall caters to three types of businesses – Merchandise Retail, Promotional Events and
Food Services. The organization is accordingly divided into three verticals. Each business
vertical is headed by a Business Development Manager (BDM), who reports to the CEO &
MD Mr Krishna Reddy. In addition, there is a Facility Management Department
responsible for utilities, maintenance, house-keeping, security and revenue collection from
parking. Apart from this, a team of 11 professionals works in the corporate office directly
under the CEO.

The INOX multiplex has 6 screens and the contractual arrangements are directly handled
by the CEO. For the remaining four businesses, including parking, the CEO has delegated
P&L responsibility to the BDMs and Facility Manager. On one hand, the delegation of
responsibilities has empowered the four middle level managers, but on the other, it has also
resulted in great tussle among the four. Apart from professional competition for career
growth, the major source of rivalry has been an equitable allotment of costs and incentives.

The Business

SellOne Mall provides the retail space to several businesses and generates revenue through
rental. Lease agreements are negotiated and signed separately with each lessee. The terms
and conditions of each agreement are different. The minimum rent per square foot is
specified by the company’s cost accountant, in consultation with the CEO. The job of the
BDM is to rent out entire available area and also extract maximum rental possible per unit
area. The performance of a BDM is measured with two factors – average occupancy and
average additional rent charged per square foot over the minimum rent specified by the
CEO. Lately, the Facility Manager has also been asked to become more business minded.

The following two tables provides supporting data about SellOne Mall.

Business Vertical Carpet Area Footfalls (on an Number of

(square feet) average day) outlets
Food Services 25,000 350 18
Merchandise Retail 100,000 800 19
Promotional Events 10,000 2000 2 per week
Parking Space 60,000 700 --
INOX 80,000 1000 6
Total 275,000 2800 43