Problem 18-5A Polk and Stoneman 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 years 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
Activity Cost Pools	Cost Drivers	Estimated Overhead	Expected Use of Cost Drivers	Audit	Tax
Employee training	Direct labor dollars	$213,000	$1,775,000	$1,139,000	$636,000
Typing and secretarial	Number of reports/forms	76,250	2,500	800	1,700
Computing	Number of minutes	189,550	60,000	25,000	35,000
Facility rental	Number of employees	149,900	40	22	18
Travel	Per expense reports	81,300	Direct	56,000	25,300
$710,000

Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Polk and Stoneman.

Audit	Tax
Total overhead cost assigned	$	$

(1) Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates.(Round overhead rate to 2 decimal places, e.g. $12.25.)

Activity Cost Pools	Estimated Overhead	Expected Use of Cost Drivers per Activity	Activity-Based Overhead Rates
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
$

(2) Prepare a schedule assigning each activitys 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
Activity Cost Pool	Expected Use of Cost Drivers	Activity-Based Overhead Rates	Cost Assigned	Expected Use of Cost Drivers	Activity-Based Overhead Rates	Cost Assigned
Employee training	$	$	$	$	$	$
Typing and secretarial		$			$
Computing		$			$
Facility rental		$			$
Travel	$	Direct		$	Direct
Overhead costs assigned	$	$