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 Overhead Estimated Use of Cost Drivers Audit $214.200 $1,785,000 Tax $660,000 $1,125.000 Activity Cost Pools Employee training Typing and secretarial Computing Facility rental Travel 76,000 Cost Drivers Direct labor dollars Number of reports/forms Number of minutes Number of employees Per expense reports 2.500 800 1,700 195,600 60,000 27.000 33,000 40 22 18 147,000 81,200 Direct 56,000 25,300 $714,000 Your answer is incorrect. 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 456000 258000 Solution * Your answer is incorrect 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.) Estimated Overhead Activity-Based Overhead Rate Activity Cost Pools Employee training Typing and secretarial Expected Use of Cost Drivers per Activity Direct labor dollars Reports/forms $ TONE Computing Minutes $ Facility rental Employees Travel Direct Direct Audit Estimated Use of Cost Drivers Activity-Based Overhead Rates Cost Assigned Estimated Use of Cost Drivers $ DINTE $ Direct $