Dudley & Spahr, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:
Cost and activity data related to two clients is as follows: How much overhead cost would be allocated to Client 103 using the activity-based costing system?

Question

Dudley & Spahr, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:  
Cost and activity data related to two clients is as follows:  How much overhead cost would be allocated to Client 103 using the activity-based costing system?

Quizplus · Accepted Answer

To allocate overhead cost using activity-based costing system, we need to multiply the activity rate with the respective activity used by each client. 
For Client 103:
- Legal drafting cost = 100 pages x $20 per page = $2,000
- Document review cost = 50 hours x $45 per hour = $2,250
- Case management cost = 3 cases x $1,000 per case = $3,000
- Total overhead cost allocated = $2,000 x 0.15 + $2,250 x 0.25 + $3,000 x 0.60 = $313.50 + $562.50 + $2,237 = $3,113

Dudley & Spahr, Attorneys at Law, Provide a Variety of Legal