ewis and Stark is a public accounting firm that offers two primary Assign o eparation. A controversy has developed between the partners of the overhead costs to services 4.5A (LO 1,2,3,4), AN Service sing traditional costing and ABC; scrvice ting a rates and unit two service lines as to who is contributing the greater amount to the bottom line. The area of contention compute overhead ra 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 costs; compare resulrs. Estimated Use of Cost Estimated Use of Cost Drivers per Service Estimated Overhead Drivers Audit Activity Cost Pools Cost Drivers 1 ax Employee training Direct labor dolars $216,000 $1,800,000 $1,100,000 $700,000 Typing and Number of reports/ 1,700 27,000 33,000 18 56,000 25,300 800 76,200 204,000 142,500 81,300 $720,000 2,500 60,000 40 Direct secretrial Computing Facility rental Travel Number of minutes Number of employees Per expense reports Instructions a. Using traditional product costing as proposed by the tax partners, compute the total overhead cost b. 1. Using activity-based costing, prepare a schedule showing the computations of the activity-based 2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use assigned to both services (audit and tax) of Lewis and Stark. (2) Cost assigned-Tax $337,441 b. overhead rates (per cost driver). of the cost drivers. c. Comment on the comparative overhead cost for the two services under both traditional costing . Difference-Audit $57,441 and ABC