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.

Activity Cost Pool
Employee training
Typing and secretarial
Computing
Facility rental
Travel

Estimated
Expected Use of
Overhead
Cost Drivers
$233,675
1,797,500
2,500
76,040
60,000
187,185
140,800
40
81,300
Direct
$719,000

Cost Driver
Direct labor dollars
Number of reports
Number of minutes
Number of employees
Per expense reports

Expected Use of Drivers by Product
Audit
1,141,000
800
25,000
22
56,000

Tax
656,500
1,700
35,000
18
25,300

Instructions:
(a) Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Polk and Stoneman

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    polk_and_stoneman.xlsx