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Lawis and Stark is a public accounting firm that offers two primary servicins, aucliting and tax-return preparation. A controversy has developed between the partners of
Lawis and Stark is a public accounting firm that offers two primary servicins, aucliting 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, Estimated Use of Cost Drivers per Service Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Audit Tax $220,500 $1,837,500 $1,153,000 Employee training Typing and secretarial Computing Direct labor dollars Number of reports/forms $684,500 76.300 2.500 B00 1.700 Number of minutes 216,000 60,000 27.000 33.000 Facility rental Number of employees 141.000 40 22 18 Travel Per expense reports 81.200 Direct 56,000 25.300 $235.000 Prepare a schedule assigning each activity's cwerhead cast pool to each service based on the use of the cost drivers. (Round overhead rates to 2 decimal places, s. 12.25 and cost assigned to decimal places, eg 2,500) Audit Activity-Based Overhead Rates Estimated Use of Cost Drivers Activity Cost Pool Cost Assigned Employee training Typing and secretarial $ Computing $ Facility rental Travel Direct Overhead costs assigned et poort sconheuserome COST Orivers PROLITO overhead rutes to 2 decimul places, s. 12.25 and cont assigned to O decimal places, es 2,500) Tax Cost Assigned Estimated Use of Cost Drivers Activity-Based Overhead Rates Cost Assigned $ Direct
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