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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 Use of Cost Drivers per Service Estimated Use of Cost Drivers Estimated Overhead Audit Tax $702,500 $221.100 $1.842,500 $1.140,000 76.900 2,500 800 1,700 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 213,000 60,000 27,000 33,000 40 145,000 18 22 81,000 Trace directly 56,000 25,300 $737.000 (a) Your answer is correct Using traditional product costing as proposed by the taxpartners, compute the total overhead cost assigned to both services (audit and tax) of Lewis and Stark, Audit Tax Total overhead cost assigned $ 456000 $ 1000 e Textbook and Media Attempts: 1 of 5 used a Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Hint: As a result of breaking out travel costs as a separate cost pool, travel costs can now be traced directly to services provided, Thus, an overhead rate is not needed.) (Round overhead rates to 2 decimal places, eg. 12.25.) Estimated Overhead Activity-Basec Overhead Rate Activity Cost Pools Employee training Typing and secretarial Expected Use of Cost Drivers per Activity Direct labor 1842500 dollars 221100 0.12 76900 2500 Reports/forms $ 30.76 Computing 213000 3.55 60000 Minutes Facility rental 145000 40 Employees $ 3625 Travel 81000 Direct Direct $ 737000 Prepare a schedule assigning each activity's overhead cost pool to each accounting 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) Audit Activity-Based Overhead Rates Activity Cost Pool Use of Cost Drivers Cost Assigned Cost D $ $ $ Employee training $ Typing and secretarial $ $ Computing Facility rental Travel Direct S Overhead costs assigned Prepare a schedule assigning each activity's overhead cost pool to each accounting service based on the use of the cost drivers, (Round overhead rates to 2 decimal places, eg. 12.25 and cost assigned to 0 decimal places, eg. 2,500.) Tax Use of Cost Drivers per Service Activity-Based Overhead Rates Cost Assigned Cost Assigned $ $ $ $ $ $ Direct etbookand Media