AJ Accounting performs two types of services, Audit and Tax. AJ\'s overhead cost

Question

AJ Accounting performs two types of services, Audit and Tax. AJ's overhead costs consist of computer support, $200,000; and legal support, $100,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800


Overhead applied to tax services using traditional costing is
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.

Overhead applied to audit services using activity-based costing is
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.

Explanation / Answer

Overhead applied to tax services using traditional costing is C) $180,000. Overhead applied to audit services using activity-based costing is B) $120,000.

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