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Show work for all a,b,c parts please! Thank you P4-5A Polk and Stoneman is a public accounting firm that offers two primary services, auditing and
Show work for all a,b,c parts please! Thank you P4-5A 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 assign- ing 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 Expected Use of of Cost Drivers Per Service AuditTax Estimated Cost Activity Cost PoolsCost DriversOverhead Employee training Typing and Drivers Direct labor dollars Number of reports/ forms Number of minutes Number of employees Per expense reports $216,000 $1,800,000 $1,050,000 $750,000 800 1,700 18 76,200 2,500 secretarial Computing Facility rental Travel 20 142,500 4,000 60,000 25,000 35,000 22 25 81,300 Direct 56,000 25,300 $720,000 Instructions (a) 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. (b) (1) Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver) (2) Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. c)Comment on the comparative overhead cost for the two services under both traditional costing and ABC
Show work for all a,b,c parts please! Thank you
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