The Fleming Foundation is a charitable organization founded by Gaylord Fleming and Sandy Fleming. The Flemings 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 to grow and to accomplish the goals of the founders. The Foundation is organized into two main departments-education and program management. These departments are supported by two service departments-information technology (IT) and administration.

There are $418,000 of costs directly traceable to each of the four departments. An additional $65,000 of indirect costs are shared among the four departments-$50,000 of which is allocated to the departments based on direct labor-hours and $15,000 to the departments based on the number of personnel (headcount) in the departments.

The cost, labor-hours, and headcount in these departments in the most recent year are as follows:

 

	Direct Cost	Labor Hours	No. of Personnel
Information technology	$6,000	2,000	2
Administration	$122,000	6,000	3
Education	$100,000	4,000	3
Program management	$190,000	4,000	4
	$418,000

Indirect Costs:                                   

 Allocated on basis of DLHs =   $50,000

 Allocated on basis of headcount = $15,000

The costs of the two main departments are allocated to the two programs 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 headcount used in the two programs. The following table shows the labor hours and headcount consumption by the two programs.

IT serves Education, Administration, and Program Management 20 percent, 20 percent, and 60 percent of its time, respectively. Administration serves Education, IT, and Program Management 30 percent, 10 percent, and 60 percent, respectively.

Required

Determine the costs allocated to the mental health and housing programs using the direct method, the step method (assuming that IT goes first), and the reciprocalmethod.

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Labor Hours Headcount Mental health Housing Labor-hours in education Headcount in program 2,000 2,000 4.000 management