Waters Edge Inc. operates a small long-term care and assisted living home.

Waters Edge provides meals to all residents through a single kitchen. All costs (labour, utilities, etc.) are shared between all residents in both the long-term care and assisted living homes.

As well, there is a centralized cleaning department that provides cleaning services to the long-term care, assisted living, as well as the kitchen.

The following table contains the relevant cost and allocation data for 2021.

	Annual Operating Cost
Cleaning Department	$147 000
Central Kitchen	$205 500

Allocation Base	Kitchen	Long-term Care	Assisted Living
Square feet	1000	2000	3000
Number of residents		6	4

Required:

1. (8 marks) Currently, Waters Edge LTD allocates the kitchen and cleaning department costs based on the number of residents in each (long-term care and assisted living).

Determine the amount of service department costs are assigned to each of the homes (L-T care and assisted living) using this existing allocation method.

2. (12 marks) The auditors of Waters Edge LTD believes the step method of allocation should be used by first assigning cleaning costs based on square footage and then the kitchen costs based on number of residents.

Determine the amount of service department costs assigned to both homes (LT care and assisted living) using this allocation method.

3. (5 marks) Briefly discuss a shared services cost allocation method.