The partners of Mayweather and Pacquiao, a security services firm, decide to implement an activity-based costing system.
Question:
The partners of Mayweather and Pacquiao, a security services 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, $400,000; technology support, $20,000; and litigation support, $300,000. It is determined that the best cost driver for fringe benefits is professional labor dollars ($2,000,000); technology support is partner labor hours (2,000); and research support is professional labor hours (25,000).
Required:
Compute the budgeted overhead rate for each of the three cost pools.
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