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Polk and Stoneman problem




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


Paper#81514 | Written in 18-Jul-2015

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