Cost allocation is often the centerpiece of conflict that is resolved in court cases. The litigation usually involves the dispute over how

costs are allocated to a product or product line that is of interest to the plaintiff. This is particularly an issue when a company produces

some products or services for a price$-$competitive market while other products or services are produced for a governmental unit on a

cost$-$plus or reimbursement basis.

Nursing Care Inc., or $NCl,$ operates both a small nursing home and retirement home. There is a single kitchen used to provide meals to

both the nursing home and retirement home, meaning labor costs and utilities costs of the kitchen are shared by the two homes. There

is also a centralized cleaning department that provides the cleaning services for both homes as well as the kitchen. The nursing home

serves only indigent patients who are on Medicaid. The state Department of Health and Family Services $($DHFS$)$ reimburses NCl at

Medicaid$-$approved cost reimbursement rates. The Medicaid reimbursement rates are based on cost information supplied by NCl$.$ The

relevant cost and allocation data for the most recent year appear in the following table.

Required:

Management of $NCl$ currently allocates the kitchen and cleaning department costs based on the number of residents in each home.

Determine the amount of service department costs assigned to each of the homes using this allocation base. $($Round percentages to

two decimal places in your calculations.$)$

DHFS auditors believe the step method of allocation should be used by first assigning cleaning costs based on square feet and then

kitchen costs based on number of residents. Determine the amount of service department costs assigned to each of the homes using

this allocation method. $($Do not round percentage answers.$)$