Ch17 Q12 b2 (Answer b2 please)
Lewis and Stark is a public accounting firm that offers two primary services, auditing and tax-return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for purposes of analysis and comparison. The following overhead data are collected to develop the comparison. Estimated Use of Cost Drivers per Service Activity Cost Pools Employee training Typing and secretarial Computing Facility rental Travel Cost Drivers Direct labor dollars Number of reports/forms Number of minutes Number of employees Per expense reports Estimated Overhead $221,100 76.900 213,000 145,000 81,000 $737,000 Estimated Use of Cost Drivers $1,842,500 2.500 60,000 40 Direct Audit $1,140,000 800 27,000 22 56,000 Tax $702.500 1.700 33,000 18 25,300 Using traditional product costing as proposed by the tax partners.compute the total overhead cost assigned to both services audit and tax of Lewis and Stark Audit Total overhead cost assigned $ 458000 $ 281000 e Textbook and Media Attempts: Fof 5 used (61) Your answer is correct Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rotes to 2 decimal places, eg, 12.25.) Estimated Overhead Activity Base Overhead Rate Activity Gost Pools Employee training Typing and Secretarial Expected Use of Cost Drivers per Activity Direct labor 1842500 dollars 221100 $ $ 12 76900 2500 Reports/forms 30.76 Computing 213000 60000 Minutes S 3.55 Facility rental 145000 440 Employees S 3625 Travel 81000 Direct Direct 737000 (52) Prepare a schedule assigning each activitys overhead cost pool to each service based on the use of the cost drivers (Round overhead rates to 2 decimal places, eg. 12.25 and cost assigned to O decimal places. 8. 2.500) Audit Estimated Use of Cost Drivers Activity Based Overhead Rates Activity Cost Pool Cost Assigned Employee training Typing and secretarial Computing Facility rental Direct Travel Overhead costs assigned S (62) Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers (Round overhead rates to 2 decimal places, eg. 12.25 and cost assigned to decimal places, eg. 2,500) Tax Activity-Based Overhead Rates Estimated Use of Cost Drivers Cost Assigned Cost Assigned $ GA $ Direct S A
