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 utilities 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 only indigent patients who are on Medicaid. The state Department of Health and Family 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. Annual Operating Cost Cleaning department $ 90,000 Central kitchen $ 120,000 Allocation Base Kitchen Nursing Home Retirement Home Square feet of space 1,000 2,000 3,000 Number of residents — 6 4
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 utilities 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 only indigent patients who are on Medicaid. The state Department of Health and Family 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. Annual Operating Cost Cleaning department $ 90,000 Central kitchen $ 120,000 Allocation Base Kitchen Nursing Home Retirement Home Square feet of space 1,000 2,000 3,000 Number of residents — 6 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 utilities 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 only indigent patients who are on Medicaid. The state Department of Health and Family 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.
| Annual Operating Cost | |
|---|---|
| Cleaning department | $ 90,000 |
| Central kitchen | $ 120,000 |
| Allocation Base | Kitchen | Nursing Home | Retirement Home |
|---|---|---|---|
| Square feet of space | 1,000 | 2,000 | 3,000 |
| Number of residents | — | 6 | 4 |
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