intert Draw Page Layout Formulas Data Review View Help F Home X Anal BIU- AA Wood %14 Conditional Fat Cell Table AL fx Ontributing the greater amount to the bottom line. The area of contention is the asugnment of overhead The tax partners argue for assignin partners arpie for implementing activity-based costing The partners agree to use next year's budgeted data for purposes of analysis and com comparison Phalen and Silvester is a public accounting firm that offers two primary services, auditing and tax-retum 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 1 comparson The following overhead data are collected to develop the comparison Estimated use of cost drivers per service G H Under C 4 Estimated Overhead Estimated use of Cost Drivers 5 Employee branng Direct labor dollars $216,000 6 Typing and secretarial Number of reports forms 76,200 Computing Number of minutes 204.000 Audit $1,800,000 $1,100,000 $700,000 2,500 800 1.700 60,000 33,000 Tax Facility rental Travel Number of employees 142.500 40 Per expense reports 10 61,300 $720,000 Direct 27,000 22 56,000 18 25.300 11 Rigured a Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Lewes and Stark (5 points Using activity-based costing, complete the schedule below showing the computations of the activity-based overhead rates (per cost driver) (10 points) e. Complete the schedule below assigning each activity's overhead cost pool to each service based on the use of the cost drivers (10 points) Comment on the comparative overhead cost for the two services under both traditional costing and ABC (5 points) b. P1 P2 93 Exc Activity Cost Pools Calculation of overhead Rates Employee training Typing and secretarial 2 2 Pil " 4x #3 Q W E 2 54 fr " R a Activity Based Overhead Rates 42 % 25 T " 6