Exercise 9-6 Computing Activity-Based Costing Rates The partners of Mason and Hu

Question

Exercise 9-6
Computing Activity-Based Costing Rates

The partners of Mason and Hutton, attorneys-at-law, decide to implement an activity-based costing system for their firm. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $450,000; paralegal support, $250,000; and research support, $650,000. It is determined that the best cost driver for fringe benefits is professional labor dollars ($1,460,000); paralegal support is partner labor hours (4,000); and research support is professional labor hours (20,000).

Compute the budgeted overhead rates for each of the three cost pools. Round your answers to two decimal places, if necessary.

Cost Pool Fringe benefits Paralegal support Research support Budgeted Rate of professional labor dollars partner labor hour professional labor hour O

Explanation / Answer

Cost pool Fringe benefits 30.82% of professional labor dollars =450000/1460000 Paralegal support 62.5 partner labor hour =250000/4000 Research support 32.5 professional labor hour =650000/20000

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