Prepare a schedule assigning each activitys overhead cost

Assignment Help Accounting Basics

Reference no: EM13585961

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 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.

				Expected Use of Cost Drivers per Service
Activity Cost Pools	Cost Drivers	Estimated Overhead	Expected Use of Cost Drivers	Audit	Tax
Employee training	Direct labor dollars	$269,625	$1,797,500	$1,100,000	$697,500
Typing and secretarial	Number of reports/forms	76,840	2,500	800	1,700
Computing	Number of minutes	149,135	60,000	25,000	35,000
Facility rental	Number of employees	142,100	40	22	18
Travel	Per expense reports	81,300	Direct	56,000	25,300
		$719,000

(1) Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates. (Round overhead rate to 2 decimal places, e.g. $12.25.)

Activity Cost Pools	Estimated Overhead	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
	$

(2) Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers. (Round overhead rate to 2 decimal places, e.g. $12.25 and cost assigned to 0 decimal places, e.g. $2,500. )

Audit

Tax

Activity Cost Pool

Expected Use of

Cost Drivers

Activity-Based

Overhead Rates

Cost Assigned

Expected Use of

Cost Drivers

Activity-Based

Overhead Rates

Cost Assigned

Employee training

Typing and secretarial

Computing

Facility rental

Travel

Direct

Overhead costs assigned

Reference no: EM13585961

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