Cost Allocation and Legal Disputes Cost allocation is often the centerpiece of conflict that is resolved in court cases. The litigation usually involves the dispute over how costs are allocated to a product or product line that is of interest to the plaintiff. This is particularly an issue when a company produces some products or services for a price-competitive market while other products or services are produced for a governmental unit on a cost-plus or reimbursement basis.

The following cost allocation disputes involve an organization (Nursing Care Inc, or NCI) that operates both a nursing home and an apartment building for retirees (retirement home). A single kitchen is used to provide meals to both the nursing home and retirement home. Also, certain labor costs and utilities costs of the kitchen are shared by the two homes. Many of those living in the nurs- ing home are indigent and are on Medicaid. The state Department of Health and Family Services (DHFS) reimburses NCI at Medicaid approved cost reimbursement rates. The Medicaid reimburse- ment rates are based on cost information supplied by the organization, in this case NCI, and are assumed to be accurate; cost allocations are assumed to be reasonable.

Discussion: Cost Allocation and Legal Disputes

DHFS has examined the cost report of NCI and has raised the following issues which are now being litigated.

Required (The above is based upon an actual case, with names disguised.)

For each issue, consider whether you think the defendant (NCI) or the plaintiff (DHFS) has the valid posi- tion, based on your understanding of cost allocation.

DHFS alleges that NCI charged specific milk, condiments, and paper products to the nursing home, without following the usual 60 percent (nursing home) and 40 percent (retirement home) sharing for food costs. NCI asserts that these items are used in the nursing home to counteract the greater danger of spread of disease in the nursing home. DHFS claims that NCI’s documentation to support charging these costs directly to the nursing home is inadequate

DHFS alleges that nourishments (liquid supplements, cookies, and some puree foods) that are consumed by nursing home residents at bedtime for their special health needs are akin to “seconds” at meals and should be allocated to both the nursing home and the retirement home

Three kitchen employees not involved in meal preparation are involved in service to both the nursing home and the retirement home; NCI asks the three employees to keep track of how much time they spend on the nursing home versus the retirement home. These time reports are then sent to management and are used as a basis for allocating the cost of the employees to the two homes. DHFS alleges that the practice is not sufficiently accurate, and relies largely on unsupported, self-reported information.

NCI allocates utility costs to the two homes using an industrial engineering study performed by the power company on five days in June four years ago. DHFS disputes that this allocation base is valid and says that NCI must use a square footage base rate.

You must proofread your paper. But do not strictly rely on your computer’s spell-checker and grammar-checker; failure to do so indicates a lack of effort on your part and you can expect your grade to suffer accordingly. Papers with numerous misspelled words and grammatical mistakes will be penalized. Read over your paper – in silence and then aloud – before handing it in and make corrections as necessary. Often it is advantageous to have a friend proofread your paper for obvious errors. Handwritten corrections are preferable to uncorrected mistakes.

Use a standard 10 to 12 point (10 to 12 characters per inch) typeface. Smaller or compressed type and papers with small margins or single-spacing are hard to read. It is better to let your essay run over the recommended number of pages than to try to compress it into fewer pages.

Likewise, large type, large margins, large indentations, triple-spacing, increased leading (space between lines), increased kerning (space between letters), and any other such attempts at “padding” to increase the length of a paper are unacceptable, wasteful of trees, and will not fool your professor.

The paper must be neatly formatted, double-spaced with a one-inch margin on the top, bottom, and sides of each page. When submitting hard copy, be sure to use white paper and print out using dark ink. If it is hard to read your essay, it will also be hard to follow your argument.

 

ADDITIONAL INSTRUCTIONS FOR THE CLASS

Discussion Questions (DQ)

Initial responses to the DQ should address all components of the questions asked, include a minimum of one scholarly source, and be at least 250 words.
Successful responses are substantive (i.e., add something new to the discussion, engage others in the discussion, well-developed idea) and include at least one scholarly source.
One or two sentence responses, simple statements of agreement or “good post,” and responses that are off-topic will not count as substantive. Substantive responses should be at least 150 words.
I encourage you to incorporate the readings from the week (as applicable) into your responses.
Weekly Participation

Your initial responses to the mandatory DQ do not count toward participation and are graded separately.
In addition to the DQ responses, you must post at least one reply to peers (or me) on three separate days, for a total of three replies.
Participation posts do not require a scholarly source/citation (unless you cite someone else’s work).
Part of your weekly participation includes viewing the weekly announcement and attesting to watching it in the comments. These announcements are made to ensure you understand everything that is due during the week.
APA Format and Writing Quality

Familiarize yourself with APA format and practice using it correctly. It is used for most writing assignments for your degree. Visit the Writing Center in the Student Success Center, under the Resources tab in LoudCloud for APA paper templates, citation examples, tips, etc. Points will be deducted for poor use of APA format or absence of APA format (if required).
Cite all sources of information! When in doubt, cite the source. Paraphrasing also requires a citation.
I highly recommend using the APA Publication Manual, 6th edition.
Use of Direct Quotes

I discourage overutilization of direct quotes in DQs and assignments at the Masters’ level and deduct points accordingly.
As Masters’ level students, it is important that you be able to critically analyze and interpret information from journal articles and other resources. Simply restating someone else’s words does not demonstrate an understanding of the content or critical analysis of the content.
It is best to paraphrase content and cite your source.
LopesWrite Policy

For assignments that need to be submitted to LopesWrite, please be sure you have received your report and Similarity Index (SI) percentage BEFORE you do a “final submit” to me.
Once you have received your report, please review it. This report will show you grammatical, punctuation, and spelling errors that can easily be fixed. Take the extra few minutes to review instead of getting counted off for these mistakes.
Review your similarities. Did you forget to cite something? Did you not paraphrase well enough? Is your paper made up of someone else’s thoughts more than your own?
Visit the Writing Center in the Student Success Center, under the Resources tab in LoudCloud for tips on improving your paper and SI score.
Late Policy

The university’s policy on late assignments is 10% penalty PER DAY LATE. This also applies to late DQ replies.
Please communicate with me if you anticipate having to submit an assignment late. I am happy to be flexible, with advance notice. We may be able to work out an extension based on extenuating circumstances.
If you do not communicate with me before submitting an assignment late, the GCU late policy will be in effect.
I do not accept assignments that are two or more weeks late unless we have worked out an extension.
As per policy, no assignments are accepted after the last day of class. Any assignment submitted after midnight on the last day of class will not be accepted for grading.
Communication

Communication is so very important. There are multiple ways to communicate with me:
Questions to Instructor Forum: This is a great place to ask course content or assignment questions. If you have a question, there is a good chance one of your peers does as well. This is a public forum for the class.
Individual Forum: This is a private forum to ask me questions or send me messages. This will be checked at least once every 24 hours.