Question 7 of 7 -/1 E View Policies Current Attempt in Progress 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 $1,842,500 2.500 Tax Audit $1,100,000 800 Activity Cost Pools Employee training Typing and secretarial Computing Facility rental Travel Cost Drivers Direct labor dollars Number of reports/forms Number of minutes Number of employees Per expense reports Estimated Overhead $239,525 76,100 200,075 140,000 81,300 $737,000 60.000 40 27,000 22 56,000 $742,500 1,700 33,000 18 25,300 Direct 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 $ $ Question 7 of 7 - / 1 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, eg, 12.25.) Estimated Overhead Activity-Bas Overhead Ra Activity Cost Pools Employee training Typing and secretarial Expected Use of Cost Drivers per Activity Direct labor dollars $ Reports/forms $ Minutes $ Computing Facility Employees $ rental Travel Direct Direct 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 Direct labor dollars Activity-Based Overhead Rates per DL dollar $ $ Reports/forms $ per report/form Minutes $ per minute Employees per employee 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 decimal places, e.g. 2,500.) Expected Use of Cost Drivers Audit Activity-Based Overhead Rates Activity Cost Pool Cost Assigned Employee training $ $ $ Typing and secretarial $ Computing $ Facility rental Travel Direct Overhead costs assigned Save for Later Attempts: 0 of 2 used Submit Answer 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, eg. 12.25 and cost assigned to O decimal places, eg. 2,500.) Expected Use of Cost Drivers Tax Activity-Based Overhead Rates Cost Assigned Cost Assigned $ $ $ $ $ $ Direct $ $ Save for Later Attempts: 0 of 2 used Submit
