The law firm of Duwe, Cheatam and Howe provides legal services for clients. During the year corporate clients required $5,000$ hours of legal services, while individuals required $3,000$ hours $($the firm considers these hours 'Direct Labor'$).$ The firm has traditionally used direct labor hours to assign overheads. However, Ms$.$ Duwe believes services to business clients cost more than services to individuals and is considering an activity$-$based costing system. The firm's revenues and costs for the year are show below:

Corporate Individual Total

Revenue $$150,000$ $$150,000$ $$300,000$

Expenses:

Lawyers' salaries $$100,000$ $ $50,000$ $$150,000$

Overhead:

Filing $ $10,000$

Quality control $ $5,000$

Data entry $ $25,000$

Total Overhead $ $40,000$

Mr$.$ Cheatam has kept records of the following data for use in the activity$-$based costing system:

Activity Level

Overhead Cost Cost Driver Corporate Individual

Filing Number of clients $55$

Quality control Number of hours spent $7525$

Data entry Number of pages entered $1,0001,500$

Please use the following information to answer questions the following $6$ questions.

Question $1$

What is the overhead allocation rate using the traditional direct$-$hour allocation base?

Question $2$

What is the net income for the Corporate client services segment using the traditional direct$-$hour allocation base? $.$

Question $3$

What is the net income for the Corporate client services segment using the three cost drivers in the ABC model? $.$

Question $4$

What is the total net income for the firm under the traditional direct$-$hour allocation base? $.$

Question $5$

What is the total net income for the firm using the three cost drivers in the ABC model? $.$

Question $6$

Which do you believe is the best way to allocate costs in this example?

$-$Traditional Costing System based on Direct Labor

$-$Activity Based Costing system based on multiple cost drivers

Limited Labrador Corporation $($LLC for short$)$ is an emerging company that manufactures and sells peanut butter treats for dogs. The treats include two ingredients: peanut butter, and added nutrient powder. The ratio of Peanut Butter to nutrient powder is $2$:$1.$ The treats are packaged in $1\mathrm{.}5$ oz single$-$serve cups. Jen is the chef of LLC and her sole role is to make the treats, which she does in a commercial kitchen that LLC rents for a contracted $25$ days a year. That rent includes the utilities and use of the food processor and packaging equipment. The kitchen facility will also store any packaged treats and ingredients for free.

LLC did its first production run in $2019,$ and a second in $2020.$ At the end of the run in $2020,$ Jen got a bunch of Accounting students to close her books. The ending balance at the end of $2020$ was as follows:

Item Percent Completed

Peanut Butter $60\%$

Nutrient Powder $45\%$

$1\mathrm{.}5$ Oz Cups $($with lids$)100\%$

Direct Labor $20\%$

Overhead $($allocated on DL hrs$)20\%$

Treats in Process $1,000$ units

Curious about how well the students did, Jen went to inspect the Work In Process stores, and found an extra package of peanut butter that the students had missed and forgotten to factor into their calculations.

Please use this information to answer the following $7$ questions.

Question $7$

What was the percentage completion of the units LLC sold in $2020?$

$($Hint: if you start thinking to yourself "Mac hasn't given me enough information in the problem to calculate this..." you are overthinking it$.)$

Question $8$

What would finding this extra peanut butter do to the percent completion assumptions for the Peanut Butter WIP inventory?

Group of answer choices

a$)$ Increase the $\%$ completion of Peanut Butter

b$)$ Decrease the $\%$ completion of Peanut Butter

c$)$ No effect on the $\%$ completion of Peanut Butter

Question $9$

What would finding this extra peanut butter do to the number of equivalent units of Peanut Butter in the WIP inventory?

a$)$ Increase the number of equivalent units of peanut butter

b$)$ Decrease the number of equivalent units of peanut butter

c$)$ No effect on the number of equivalent units of peanut butter

Question $10$

What would finding this extra peanut butter do to the percent completion assumptions for the Nutrient Powder WIP inventory?

a$)$ Increase the $\%$ completion of Nutrient Powder

b$)$ Decrease the $\%$ completion of Nutrient Powder

c$)$ No effect on the $\%$ completion of Nutrient Powder

Question $11$

What would this extra peanut butter do to the WIP balance?

a$)$ Increase the WIP balance

b$)$ Decrease the WIP balance

c$)$ No effect on the WIP balance

Question $12$

What would finding this extra peanut butter do to the percentage completion for the Overhead account?

a$)$ Increase the $\%$ completion of Overhead

b$)$ Decrease the $\%$ completion of Overhead

c$)$ No change in the $\%$ completion of Overhead

Question $13$

If Overhead were allocated on the basis of direct material dollars instead of direct labor, what wou