Question: 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 Cost Drivers Estimated Expected Use Audit Tax Pools Overhead of Cost Drivers Employee Direct labor $1,815,000 $181,500 $1,138,000 $677,000 training dollars Typing and Number of 76,370 2,500 800 1,700 secretarial reports/forms Computing Number of 246,730 60,000 25,000 35,000 minutes Facility rental Number of 140,100 40 22 18 employees Travel Per expense 81,300 Direct 56,000 25,300 reports $726,000 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.
Question: 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 Cost Drivers Estimated Expected Use Audit Tax Pools Overhead of Cost Drivers Employee Direct labor $1,815,000 $181,500 $1,138,000 $677,000 training dollars Typing and Number of 76,370 2,500 800 1,700 secretarial reports/forms Computing Number of 246,730 60,000 25,000 35,000 minutes Facility rental Number of 140,100 40 22 18 employees Travel Per expense 81,300 Direct 56,000 25,300 reports $726,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please give me answer
Transcribed Image Text:Question:
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 Cost Drivers
Estimated
Expected Use Audit
Tax
Pools
Overhead
of Cost
Drivers
Employee
Direct labor
$1,815,000
$181,500
$1,138,000
$677,000
training
dollars
Typing and
Number of
76,370
2,500
800
1,700
secretarial
reports/forms
Computing
Number of
246,730
60,000
25,000
35,000
minutes
Facility rental Number of
140,100
40
22
18
employees
Travel
Per expense
81,300
Direct
56,000
25,300
reports
$726,000
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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education