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 Activity Cost Pools Cost Drivers Estimated Overhead Audit Tax $198.275 $1,802,500 $1,100,000 $702,500 Direct labor dollars Number of reports/forms 76.000 2,500 800 1,700 Employee training Typing and secretarial Computing Facility rental Number of minutes 225,600 60,000 27,000 33,000 140,000 40 22 18 Number of employees Per expense reports Travel 81,125 Trace directly 56,000 25,300 $721,000 Your answer is correct. Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Lewis and Stark Audit Tax Total overhead cost assigned UA 440000 UF 281000 eTextbook and Media Attempts: 1 of 5 used (61) 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, e.g. 12.25.) Estimated Overhead Activity-Based Overhead Rate: Activity Cost Pools Employee raining Expected Use of Cost Drivers per Activity Direct labor dollars $ $ UA $ yping and ecretarial Reports/forms $ $ Computing Minutes $ acility ental Employees $ Travel Direct Direct $