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DolphinCorp is an old-school consulting firm that wants to move from traditional methods for apportioning overhead costs to activity-based costing of overhead. Last year, they

DolphinCorp is an old-school consulting firm that wants to move from traditional methods for apportioning overhead costs to activity-based costing of overhead. Last year, they generated $5 million in revenue against $2 million in direct costs and $1 million in overhead. Traditionally, on a project, they would simply mark up the estimated direct costs by the ratio of overhead to direct costs.

As they move to activity-based costing, their accounting team has identified two main cost pools, administration and marketing. Administration costs are driven by the time senior partners spend on a project (valued at $190 an hour of partner time), while marketing costs are driven by total revenue from a project (valued at $0.10 per dollar of revenue earned).

One of the partners just won a contract worth $50,582 in total revenue. The firm estimated it would take $27,002 worth of direct labor and 3 hours of partner time doing project administration.

What is the *difference* in overhead costs on this project between the traditional and activity-based costing methods? (Hint: solve for the traditional overhead cost, then the activity-based, then subtract the latter from the former).

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