* Question 11 Hy and van Lamsweerde 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 regarding 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 labour dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for analysis and comparison. The following overhead data are collected: Estimated Use of Cost Drivers per Service Estimated Use Estimated of Cost Activity Cost Pools Cost Drivers Overhead Drivers Audit Tax Employee training Direct labour dollars $226,023 $1,883,525 5913,000 $970,525 Typing and secretarial Number of reports and forms 84,000 3,000 800 2,200 Computing Number of minutes 211,050 60,300 25,300 35,000 Facility rental Number of employees 149,037 47 29 18 Travel Per expense reports 83,300 Direct 56,700 26,600 $753,410 Using traditional product costing as proposed by the tax partners, calculate the total overhead cost assigned both services (audit and tax) of Hy and van Lamsweerde. Overhead assigned to audit: Overhead assigned to tax: $ 1. Using activity-based costing, prepare a schedule showing the calculations of the activity-based overhead rates (per cost driver). (Round answers to 2 decimal places, e.g. 15.25.) Activity-based overhead rates Employee training per DL dollar Typing and secretarial $ per report/form Computing $ per minute Facility rental $ per employee 2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. Audit Tax Training Typing and secretarial Computing Rent Travel (Direct) Total overhead assigned Classify each of the activities as a value-added activity or a non-value-added activity. Employee training Typing and secretarial Computing Facility rental Travel * Question 11 Hy and van Lamsweerde 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 regarding 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 labour dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for analysis and comparison. The following overhead data are collected: Estimated Use of Cost Drivers per Service Estimated Use Estimated of Cost Activity Cost Pools Cost Drivers Overhead Drivers Audit Tax Employee training Direct labour dollars $226,023 $1,883,525 5913,000 $970,525 Typing and secretarial Number of reports and forms 84,000 3,000 800 2,200 Computing Number of minutes 211,050 60,300 25,300 35,000 Facility rental Number of employees 149,037 47 29 18 Travel Per expense reports 83,300 Direct 56,700 26,600 $753,410 Using traditional product costing as proposed by the tax partners, calculate the total overhead cost assigned both services (audit and tax) of Hy and van Lamsweerde. Overhead assigned to audit: Overhead assigned to tax: $ 1. Using activity-based costing, prepare a schedule showing the calculations of the activity-based overhead rates (per cost driver). (Round answers to 2 decimal places, e.g. 15.25.) Activity-based overhead rates Employee training per DL dollar Typing and secretarial $ per report/form Computing $ per minute Facility rental $ per employee 2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. Audit Tax Training Typing and secretarial Computing Rent Travel (Direct) Total overhead assigned Classify each of the activities as a value-added activity or a non-value-added activity. Employee training Typing and secretarial Computing Facility rental Travel
