Lee Ltd is a public accounting firm that offers two main services, auditing and tax return preparations. A controversy has developed between the two partners of the two service lines as to who is contributing the greater amount to the bottom line. The contentious area is the assignment of overhead. The tax partner argues for assigning overhead on the basis of 40% of direct labour dollars and the audit partner argues for implementing activity-based costing. The partners agree to use next years budged data for purposes of analysis and comparison. The following cost data are collected to develop the comparison: Expected use of cost drivers per service Activity cost pool Cost driver Estimated overhead Expected use of cost driver Audit Tax return Employee training Direct labour dollars $209,000 $1,900,000 $1,000,000 $900,000 Typing and secretarial Number of reports/forms $76,200 2,500 600 1,900 Computing Number of minutes $204,000 60,000 25,000 35,000 Facility rental Number of employees $142,500 38 20 18 Travel Per expense reports $128,300 Direct cost 86,800 41,500 Required: show all your workings. I. Using traditional product costing as proposed by the tax partner, calculate the total cost of audit and tax return services of Lee Ltd. (6 marks) II. Using activity based costing: a) prepare a schedule showing the calculations of the cost per unit of activity driver. (8 marks) b) calculate the total cost for audit and tax return services of Lee Ltd. (10 marks)