Let’s consider costing for a service organization. Assume youare a consultant for a law firm. The firm currently has notraditional cost accounting system in place. A partner has taken acourse in management accounting and wants to understand traditionaland activity based costing. Explain to the partner how atraditional overhead rate is determined and what would be a gooddenominator activity to use as the base. Also explain what is meantby activity-based costing and how it would might lead to betterdecisions for the firm.
