what they were originally. P5.50B (LO 1, 2, 3, 4) Service McDonald and O'Toole is a law firm that serves both individuals and corporations. 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 individual partners argue for assigning overhead on the basis of 28.125% of direct labour dollars. while the corporate 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 Estimated Use of Cost Drivers per Service Estimated Estimated Use Activity Cost Pool Cost Driver Overhead of Cost Drivers Corporate Individual Employee training Direct labour dollars $120,000 $1,600,000 $900,000 $700,000 Clerical Number of reports and forms 60,000 2,000 500 1,500 Computing Number of minutes 100,000 40,000 17,000 23,000 Facility rental Number of employees 100,000, 0 25 14 11 Travel Per expense reports 70,000 Direct 48,000 22,000 $450,000 Instructions a. Using traditional product costing as proposed by the individual partners, calculate the total over- head cost assigned to both services (individual and corporate) of McDonald and O'Toole. b. 1. Using activity-based costing, prepare a schedule showing the calculations 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. Classify each of the activities as a value-added activity or a non-value-added activity. d. Comment on the comparative overhead cost of the two service lines under both traditional costing and ABC