P4-5B Smith and Jones is a law firm that serves both individuals and corporations. A controversy has developed between the partners of the two service lines as to who is con- tributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The individual partners argue for assigning overhead on the basis of 30% of direct labor dollars, while the corporate 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. Expected Use of Estimated Cost Activity Cost Pool Cost Driver Overhead Employee training Direct labor dollars $120,000 Drivers $1,600,000 Typing and Number of reports/ secretarial forms 60,000 2,000 Computing Number of minutes 130,000 40,000 Facility rental Number of employees 100,000 25 Travel Per expense reports 70,000 Direct $480,000 Instructions (a) Using traditional product costing, compute the total overhead cost assigned to both services (individual and corporate) of Smith and Jones. (b) (1) Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (2) Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. (c) E Comment on the comparative overhead for the two service lines under both traditional costing and ABC.