Chapter 4 Activity-Based Management and Activity-Based Costing 34. LO.4 (OH allocation using cost drivers) Wambaugh Corp. has decided to imple- ment an activity-based costing system for its in-house legal department. The legal department's primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or customer contracts (Contracts) Reviewing regulatory compliance issues (Regulation) Court actions (Court) $270,000 379,500 862,500 Management has determined that the appropriate cost allocation base for Con- tracts is the number of pages in the contract reviewed, for Regulation is the number of reviews, and for Court is number of hours of court time. For 2013, the legal depart- ment reviewed 500,000 pages of contracts, responded to 750 regulatory review requests, and logged 3,750 hours in court. a. Determine the allocation rate for each activity in the legal department. b. What amount would be charged to a department that had 21,000 pages of contracts reviewed, made 27 regulatory review requests, and consumed 315 professional hours in court services during the year? c. How can the developed rates be used for evaluating output relative to cost incurred in the legal department? What alternative does the firm have to maintaining an inter- nal legal department and how might this choice affect costs? 35. LO.4 (ABC) Bernacke Corp. is instituting an activity-based costing project in its ten-