Problem 17-5A 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. Expected Use of Cost Drivers per Service Expected Use of Cost Drivers Estimated Overhead Activity Cost Pools Employee training Typing and secretarial Computing Facility rental Travel Cost Drivers Audit Tax Direct labor dollars Number of reports/forms Number of minutes Number of employees Per expense reports $239,525 76,100 200,075 140,000 81,300 $737,000 $1,842,500 $1,100,000 $742,500 1,700 33,000 18 25,300 2,500 60,000 40 Direct 800 27,000 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 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 rate 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 Typing and secretarial Computing Facility rental Travel Direct labor dollars per DL dollar per report/form per minute per employee Reports/forms Minutes Employees 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 rate to 2 decimal places, e.g. 12.25 and cost assigned to 0 decimal places, e.g. 2,500.) Audit Tax Expected Use of Cost Drivers Activity-Based Overhead Rates Cost AssignedCost Drivers Expected Use of Activity-Based Overhead Rates Cost Assigned Activity Cost Pool Employee training Typing and secretarial Computing Facility rental Travel Direct Direct Overhead costs assigned Click if you would like to Show Work for this question: Open Show Work