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 companyr 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 Incorporated, or NCI, operates both a small nursing home and a retirement home. There is a single kitchen used to provide meals to both the nursing home and retirement home, meaning labor costs and util'rties 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 onlyr indigent patients who are on Medicaid. The state Department of Health and Familyr Services {DHFS} reimburses NCI at Medicaid-approved cost reimbursement rates. The Medicaid reimbursement rates are based on cost information supplied by NCI. The relevant cost and allocation data for the most recent year appear in the following table. Annu a1 perat ing Cost Cleaning department $ 1B5,BBEI Central kitchen $ 142,596 Retirement Allocation Ease Kitchen Nursing Home Home Square +'eet of space 1,389 2,43% 3,863 Number o-F residents E 4 Required: 1. Management of MCI currentlyr 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. 2. DH F5 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 percentages in your calculations.} 1. Direct method s 15120119 s 10030139 5 252.001] 'REIJ new. II'IJiLal-es r'u respzr'm: was expected III a cell LII a fzrrnula-bdsud calLulalrzr I: lllLurlELl: IILI pL-Irrls deducted