HW4 Tan & Partners is an accounting firm located in the central business district area in Singapore. It provides two products to its clients-tax services and audit services. Last year, total overhead costs of $1,000,000 were allocated based on direct labour hours. A total of 10,000 direct labour hours were required last year for tax clients at a cost of $350,000, and 30,000 direct labour hours were required for audit clients at a cost of $1,200,000. Direct materials used were negligible and are included in overhead costs. Sales revenue totalled $720,000 for tax services and $2,200,000 for audit services. Starting this year, Tan & Partners would like to use activity-based costing to allocate overhead rather than use one plantwide rate based on direct labour hours. The following estimates are for the activities and related activity measure (cost drivers) identified as having the greatest impact on overhead costs. Estimated Activities Estimated Activity Activity Measure Tax Audit Overhead Costs Scheduling and data entry No. of clients $ 400,000 150 100 Advertising in journals No. of a $ 100,00 45 5 Computer usage Computer hours $ 500,000 2,500 2,500 Tota 51,000,000 During the current year the company: . Did not change the hourly rate charged to clients for both tax and audit services. 11,000 direct labour hours were required for tax clients and 29,000 direct labour hours were required for audit clients. Total actual direct labour hours equal total budgeted labour hours. Had the same direct labour cost per hour as last year. Incurred the following activities: Actual Activities: Activity Tax Audit Scheduling and data entry 165 90 Advertising in journals 50 5 Computer usage 2,800 2,200 23. Using activity-based costing, compute the activity rate for each activity cost pool. Answer: (Scheduling and data entry): [_ (Advertising in journals): [ (Computer usage): [24. Using activity-based costing, compute the total costs for tax services and audit services. Answer: Tax services Audit services [ 25. Using traditional costing (the plantwide allocation method), compute the total costs for tax services and audit services, assuming that the company would like to allocate the total cost of scheduling and data entry, advertising in journals, and computer usage to tax and audit services. What type of services is over-costed under traditional costing? Answer: Tax services [ Audit services [ Over-costed product: [Tax services /audit services (circle one)]