The two partners of Hickey and Scheingold, a highly successful New York City law firm, decide to implement an activity-based costing system. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $625,000; administrative support, $120,000; and litigation support, $360,000. It is determined that the best cost driver for fringe benefits is professional labor dollars; administrative support is partner labor hours; and litigation support is professional labor hours. The budgeted annual salary and billing hours for each partner for the coming year are $500,000 and 1,500 hours, respectively. The firm has six associates with budgeted annual salaries and billing hours of $250,000 and 1,500 hours each.

Required:

Compute the budgeted overhead rate for each of the three cost pools.

Computing Activity-Based Costing Rates The two partners of Hickey and Scheingold, a highly successful New York City law firm, decide to implement an activity-based costing system. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $625,000; administrative support, 120,000; and litigation support, $360,000. It is determined that the best cost driver for fringe benefits is professional labor dollars; administrative support is partner labor hours; and litigation support is professional labor hours. The budgeted annual salary and billing hours for each partner for the coming year are $500,000 and 1,500 hours, respectively. The firm has six associates with budgeted annual salaries and billing hours of $250,000 and 1,500 hours each. Required Compute the budgeted overhead rate for each of the three cost pools. Cost Pool Budgeted Rate Fringe benefits Administrative supportS Litigation support 41.67 % (of professional labor dollars ;) 40 / partner labor hour 40 professional labor hour