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 of Estimated Overhead Activity Cost Pools Cost Drivers Cost Drivers Audit Tax Employee training Direct labor dollars $198,275 $1,802,500 $1,100,000 $702,500 Typing and secretarial Number of reports/forms 76,000 2,500 800 1,700 Computing Number of minutes 225,600 60,000 27.000 33,000 Facility rental Number of employees 140,000 40 22 18 Travel Per expense reports 81.125 Direct 56,000 25,300 $721,000 (a) 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 $ 440,000 281,000 e Textbook and Media Attempts: 1 of 3 used (61) 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, eg. 12.25.) Estimated Activity Cost Pools Expected Use of Cost Drivers per Activity Activity-Based Overhead Rates Overhead Employee training $ $ Direct labor dollars $ pe dol pe Typing and secretarial Reports/forms $ rer Computing Minutes $ pe pe Facility rental Employees $ em Travel Direct Direct Direct $