Question

The two partners of Hickey and Scheingold, a highly successful New York City law firm, decide to implement an activity-based costing system. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $625,000; administrative support, $120,000; and litigation support, $360,000. It is determined that the best cost driver for fringe benefits is professional labor dollars; administrative support is partner labor hours; and litigation support is professional labor hours.
The budgeted annual salary and billing hours for each partner for the coming year are $500,000 and 1,500 hours, respectively.
The firm has six associates with budgeted annual salaries and billing hours of $250,000 and 1,500 hours each.
Required:
Compute the budgeted overhead rate for each of the three cost pools.


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  • CreatedMarch 31, 2015
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