Problem 17-05A a, b1-52 (Video) 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 Activity Cost Pools Cost Drivers Employee training Direct labor dollars Typing and secretarial Number of reports/forms Computing Number of minutes Facility rental Number of employees Travel Per expense reports Audit $1,108,000 800 Estimated Use of Cost Drivers $1,837,500 2,500 60,000 40 Estimated Overhead S202,125 76,500 225,000 150,000 81,375 $735,000 27,000 22 $729,500 1,700 33,000 18 25,300 Direct 56,000 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 $ 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 Expected Use of Cost Drivers per Activity Activity-Based Overhead Rates Activity Cost Pools Employee training Direct labor dollars per DL dollar $ $ $ Typing and secretarial Reports/forms per report/form $ Computing Minutes per minute $ Facility rental Employees $ per employee Travel Direct Direct $ 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, e.g. 12.25 and cost assigned to 0 decimal places, e.g. 2,500.) Audit Tax Estimated Use of Activity-Based Cost Drivers Overhead Rates Cost Assigned Estimated Use of Activity-Based Cost Drivers Overhead Rates Cost Assigned Activity Cost Pool Employee training Typing and secretarial $ $ Computing $ $ Facility rental A $ Travel Direct Direct Overhead costs assigned $