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 years 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 Employee training Direct labor dollars $ 213,600 $ 1,780,000 $ 1,106,000 $ 674,000 Typing and secretarial Number of reports/forms 76,200 2,500 800 1,700 Computing Number of minutes 192,000 60,000 27,000 33,000 Facility rental Number of employees 149,000 40 22 18 Travel Per expense reports 81,200 Direct 56,000 25,300 $ 712,000 (a) Correct answer icon 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 $ 442400 $ 269600 eTextbook and Media Attempts: 1 of 3 used (b1) Your Answer Correct Answer Correct answer icon Your answer is correct. Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rates to 2 decimal places, e.g. 12.25.) Activity Cost Pools Estimated Overhead Expected Use of Cost Drivers per Activity Activity-Based Overhead Rates Employee training $ 213600 $ 1780000 Direct labor dollars $ .12 per DL dollar Typing and secretarial 76200 2500 Reports/forms $ 30.48 per report/form Computing 192000 60000 Minutes $ 3.2 per minute Facility rental 149000 40 Employees $ 3725 per employee Travel 81200 Direct Direct $ 712000 eTextbook and Media Attempts: 3 of 3 used

(b2) Prepare a schedule assigning each activitys overhead cost pool to each service based on the use of the cost drivers. (Round overhead rates to 2 decimal places, e.g. 12.25 and cost assigned to 0 decimal places, e.g. 2,500.) Audit Tax Activity Cost Pool Estimated Use of Cost Drivers Activity-Based Overhead Rates Cost Assigned Estimated Use of Cost Drivers Activity-Based Overhead Rates Cost Assigned Employee training $ $ $ $ $ Typing and secretarial $ $ Computing $ $ Facility rental $ $ Travel Direct Direct Overhead costs assigned $