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The Maggisano Foundation is a charitable organization founded by Enzo Maggisano and Katherine Maggisano. The Maggisano's intended for the charity to provide programs in health
The Maggisano Foundation is a charitable organization founded by Enzo Maggisano and Katherine Maggisano. The Maggisano's intended for the charity to provide programs in health care for the elderly, particularly those in poverty. The two main program divisions of the foundation are mental health for the elderly and housing for the elderly. In addition to these programs, the Foundation also provides health care educational programs and has a significant fund-raising effort to help the Foundation grow and accomplish the goals of the founders. The Foundation is organized into two operating departments-education and program management. These departments are supported by two service departments-information technology (IT) and administration. To summarize, there are four departments (two service departments and two operating departments) and two programs (mental health and housing for the elderly). The service department costs are allocated to the operating departments, and then the operating department costs are allocated to the programs. There are $340,000 of costs directly traceable to each of the four departments. An additional $46,500 of indirect costs is shared among the four departments$27,000 of which is allocated to the departments based on labor hours and $19,500 of which is allocated to the departments based on the number of personnel (head count) in the departments. The cost, labor hours, and head count in these departments in the most recent year are as follows: Labor Hours 2,000 Departments Information technology Administration Education Program management Direct Cost $ 10,000 115,000 112,000 103, 000 $ 340,000 Head Count 1 4 4 3 2,000 4,000 2,000 IT serves education, administration, and program management 20%, 20%, and 60% of its time, respectively. Administration serves education, IT, and program management 40%, 10%, and 50% of its time, respectively. The costs of the two operating departments (education and program management) are allocated to the two programs (mental health and housing) as follows: the costs in Education are allocated on the basis of labor hours in the programs, while the costs in program management are allocated using the head count used in the two programs. The following table shows the labor hours and head count consumption by the two programs. Labor Hours 1,000 1,000 2,000 Head Count 1 2 Mental health Housing Labor hours in education Head count in program management Required: Determine the costs allocated to the mental health and housing programs using the (a) direct method, (b) the step method (assuming that IT goes first), and (c) the reciprocal method. (Round percentage calculations to 4 decimal places (e.g., 33.3333%). Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) a) In your own words, please explain to the founding members of The Maggisano Foundation which method would generally produce a more accurate costing system. Please elaborate as to why your preferred method would be the most accurate to implement. Please also rank them in order of accuracy. b) Based on your calculations, what would your overall recommendation be to the founding members of the Maggisano Foundation in terms of which allocation method to implement? Please state why and ensure to use your own words in your response to Enzo & Katherine Maggisano
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