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, Estimated Use of Cost Drivers per Service Estimated Use Estimated Activity Cost Pools Cost Drivers Overhead Cost Drivers Audit of Tax Employee training Direct labor dollars $ 202.125 $ 1,837,500 $729,500 1.108,000 2.500 800 1.700 76,500 225,000 150,000 60,000 27.000 33.000 Typing and secretarial Number of reports/forms Computing Number of minutes Facility rental Number of employees Travel Per expense reports 40 22 18 81,375 Direct 56,000 25.300 $735.000 Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services taudit and tax) of Lewis and Stark Audit Tax Total overhead cost assigned $ Textbook and Media Using activity-based casting, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver) (Round overhead rates to 2 decimal places, eg 1225) Estimated Overhead Activity-Baser Overhead Rate Activity Cost Pools Employee training Typing and secretarial Expected Use of Cost Drivers per Activity Direct labor dollars Reports/forms Computing Minutes Facility rental Employees Travel Direct Direct $ 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, 28. 12.25.) Estimated Overhead Activity-Based Overhead Rates Expected Use of Cost Drivers per Activity Direct labor dollars per DL $ dollar per Reports/forms $ report/form Minutes $ per minute Employees $ per employee Direct Direct e Textbook and Media Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. (Round overhead rates to 2 decimal places, eg. 12.25 and cost assigned to O decimal places, s. 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 Textbook and Media Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. (Round overhead rates to 2 decimal places, eg. 1225 and cost assigned to decimal places, es. 2,500) Tax Cost Assigned Estimated Use of Cost Drivers Activity-Based Overhead Rates Cost Assigned $ Direct e Textbook and Media
