Exercise 7.26 (Algo) Cost Allocation in Health Care [LO 7.2, 7.3, 7.5] Cost allocation is offen the certerpiece of confict that is resolved in court cases. The litigation usualy 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-competive market while other products or services are produced for a governmental unit on a cost-plus or reimbursemen basis. Nursing Care incorporated, or NCl, 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 retremont home, meaning labor costs and utilies costs of the kichen are shared by the two homes. There is also a centralized cleaning dopartment that provides the cleaning services for both homes as well as the kitchen The nursing home serves only indigent potients 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 yeor appear in the following table. Requlred: 1. Mapagement of Nicl curtenty 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. DHFS audiors believe the step method of allocation should be used by first assgning cloaning costs based on square feet and then kithen 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.)