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. Estimated Use of Cost Drivers per Service Estimated Use of Cost Drivers Activity Cost Pools Cost Drivers Estimated Overhead Audit Tax Employee training Direct labor dollars $213,000 $1,775,000 $1,196,000 $579,000 Number of reports/forms 76,400 1,700 Typing and secretarial Computing 2,500 60,000 800 27,000 Number of minutes 193,200 33,000 Facility rental Number of employees 146,000 40 22 18 Travel Per expense reports 81,400 Direct 56,000 25,300 $710,000 Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver). (Round overhead rates to 2 decimal places, e.g. 12.25.) Estimated Overhead Activity Cost Pools Expected Use of Cost Drivers per Activity Activity-Based Overhead Rates Employee training $ $ Direct labor dollars $ per DL dollar Typing and secretarial Reports/forms $ per report/form Computing Minutes per minute Facility rental Employees per employee Travel Direct $ $ $ Direct
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