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Gant Accounting performs two types of services, Audit and Tax. Gant’s overhead costs consist of computer...

Gant Accounting performs two types of services, Audit and Tax. Gant’s overhead costs consist of computer support, $324000; and legal support, $162000. Information on the two services is:

  Audit   Tax  
Direct labor cost $50000 $100000
CPU minutes 40000 10000
Legal hours used 200 800


Overhead applied to tax services using activity-based costing is

$162000.
$194400.
$291600.
$324000.
Business   Accounting   
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Answer #1
Gant Overheads are as follows
i) Computer Support 324000
II) Legal Support 162000
The above Overhead Costs are to be allocated among Audit and Tax in the following Ratio
Audit : Tax Calculation
Computer Support overheads are to be allocated based on CPU Minutes 20 : 5 (40,000:10,000)
Legal Support overheads are to be allocated based on Legal Hours used 1 : 4 (200:800)
Overheads to be allocated to Tax services based on activity based costing are as follows Amount
Computer Support (324000*5/25)            64,800
Legal Support (162000*4/5)        1,29,600
Toatal amount to be allocated to Tax services based on activity based costing =        1,94,400
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