Reference no: EM133001673

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.

Activity                            Cost Pools.                     Cost Drivers.  Estimated Overhead.    Estimated Use of Cost Drivers.    Audit Tax.

Employee training        Direct labor dollars.           $214,200.               $1,785,000.                   $1,125,000.                       $660,000

Typing and secretarial.  Number of reports/forms.       76,000.                  2,500                            800                               1,700

Computing.                   Number of minutes                 195,600                 60,000                    27,000                             33,000

Facility rental.                     Number of employees.        147,000.                 40.                            22                               18

Travel Per expense reports.    81,200                        Trace directly           56,000                         25,300                     $714,000

Problem 1: Prepare a schedule assigning each activity's overhead cost pool to each accounting service based on the use of the cost drivers.