Computing activity-based costing rates
The partners of Fiorelli and Tracey, attorneys-at-law, 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, $500,000; administrative support, $120,000; and litigation support, $250,000. It is determined that the best cost driver for fringe benefits is professional labor dollars ($2,500,000); administrative support is partner labor hours (3,000); and litigation support is professional labor hours (10,000).
Required:
Compute the budgeted overhead rate for each of the three cost pools.
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