The Fleming Foundation is a charitable organization founded by Gaylord Fleming and Sandy Fleming. The Flemings intended for thecharity to provide programs in health care for older persons, particularly those in poverty. The two main program divisions of thefoundation are mental health and housing for elderly individuals. In addition to these programs, the foundation also provides healthcare educational programs and has a significant fund-raising effort to help the foundation grow and accomplish the goals of thefounders. The foundation is organized into two operating departments-education and program management. These departmentsare supported by two service departments-information technology (IT) and administration. To summarize, there are fourdepartments (two service departments and two operating departments) and two programs (mental health and housing for olderadults). The service department costs are allocated to the operating departments, and then the operating department costs areallocated to the programs.There are $512,000 of costs directly traceable to each of the four departments. An additional $65,000 of indirect costs is sharedamong the four departments-$50,000 of which is allocated to the departments based on labor hours and $15,000 of which isallocated to the departments based on the number of personnel (head count) in the departments.The cost, labor hours, and head count in these departments in the most recent year are as follows:LaborHeadHoursCountDepartmentsInformation technologyAdministrationEducationProgram managementDirectCost$ 100,000122,000100,000190,000$ 512,000Mental healthHousingLabor hours in educationHead count in program managementa. Direct Methodb. Step Methodc. Reciprocal Method2,0006,0004,0004,000IT serves education, administration, and program management 20%, 20%, and 60% of its time, respectively. Administration serveseducation, IT, and program management 30%, 10 %, and 60% of its time, respectively.The costs of the two operating departments (education and program management) are allocated to the two programs (mental healthand housing) as follows: The costs in Education are allocated on the basis of labor hours in the programs, while the costs in programmanagement are allocated using the head count used in the two programs. The following table shows the labor hours and headcount consumption by the two programs:Mental Health2LaborHours2,0002,0004,000334Cost AllocationHousingRequired:Determine the costs allocated to the mental health and housing programs using the (a) direct method. (b) the step method (assumingthat IT goes first), and (c) the reciprocal method. (Do not round Intermediate calculations. Round final answers to the nearestdollar.)HeadCount134$$$Total0

The direct method allocates the costs of service departments directly to production or operating…

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 older persons, particularly those in poverty. The two main program divisions of the foundation are mental health and housing for elderly individuals. 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 older adults). The service department costs are allocated to the operating departments, and then the operating department costs are allocated to the programs.

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 older persons, particularly those in poverty. The two main program divisions of the foundation are mental health and housing for elderly individuals. 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 older adults). The service department costs are allocated to the operating departments, and then the operating department costs are allocated to the programs.

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter15: Exempt Entities

Section: Chapter Questions

Problem 5DQ

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Question

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 older persons, particularly those in poverty. The two main program divisions of the
foundation are mental health and housing for elderly individuals. 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 older
adults). The service department costs are allocated to the operating departments, and then the operating department costs are
allocated to the programs.
There are $512,000 of costs directly traceable to each of the four departments. An additional $65,000 of indirect costs is shared
among the four departments-$50,000 of which is allocated to the departments based on labor hours and $15,000 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
Head
Hours
Count
Departments
Information technology
Administration
Education
Program management
Direct
Cost
$ 100,000
122,000
100,000
190,000
$ 512,000
Mental health
Housing
Labor hours in education
Head count in program management
a. Direct Method
b. Step Method
c. Reciprocal Method
2,000
6,000
4,000
4,000
IT serves education, administration, and program management 20%, 20%, and 60% of its time, respectively. Administration serves
education, IT, and program management 30%, 10 %, and 60% 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:
Mental Health
2
Labor
Hours
2,000
2,000
4,000
3
3
4
Cost Allocation
Housing
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. (Do not round Intermediate calculations. Round final answers to the nearest
dollar.)
Head
Count
1
3
4
$
$
$
Total
0

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