Liberty School is a private institution offering preschool and kindergarten classes. All teachers are experts in the field of early childhood education. To support the primary function of classroom instruction, Lib- erty maintains a personnel department and an administrative department. The man- ager of the administrative department estimates that her department provides services to other departments as follows:

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A. Discuss the circumstances that create reciprocal relationships among service departments.
B. Draw a chart of the relationships among the four departments.
C. Allocate the service department costs to revenue-producing departments using the step-down method.
D. Set up the equations to mathematically explain the costs of providing administrative and personnel services.

E. Determine the costs of maintaining the administrative and personnel departments using simultaneous algebraic equations.
F. Allocate the costs from the administrative and personnel departments to the preschool and kindergarten departments.

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Personnel Preschool instruction 15% 50 Kindergarten instruction 35 100% The manager of the personnel department estimates that his department provides ser- vices to other departments as follows: Administrative 30% Preschool instruction 45 Kindergarten instruction 25 100% The departmental direct costs are as follows: Administrative $100,000 Personnel 75,000 Preschool instruction 300,000 Kindergarten instruction 500,000 Total $975,000