hw ch4.4 Winkle, Kotter, and Zale is a small law firm that contains 10 partners
ID: 1175863 • Letter: H
Question
hw ch4.4
Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 12 support persons. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments—the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments to its clients. At the beginning of the current year, the firm's management made the following estimates for the year:
The predetermined overhead rate in the Research and Documents Department is based on research-hours, and the rate in the Litigation Department is based on direct attorney cost.
The costs charged to each client are made up of three elements: materials and supplies used, direct attorney costs incurred, and an applied amount of overhead from each department in which work is performed on the case.
Case 618-3 was initiated on February 10 and completed on June 30. During this period, the following costs and time were recorded on the case:
Department Research
and Documents Litigation Research-hours 19,900 - Direct attorney-hours 9,400 15,600 Materials and supplies $ 17,900 $ 5,400 Direct attorney cost $ 430,700 $ 800,900 Departmental overhead cost $ 696,500 $ 320,360
Explanation / Answer
1-a) Pre-determined overhead rate = 696500/19900 = $ 35 1-b) Pre-determined overhead rate = 320360/800900 = 40% of direct attorney cost. 2) Total ovehead cost = 17*35+2100*40% = $ 1,435 3) Departments Research & Development Litigation Total Materials and supplies 51 27 78 Direct attorney cost 400 2100 2500 Overhead cost applied 595 840 1435 Total cost 1046 2967 4013 4) Departments Research & Development Litigation Departmental overhead cost incurred 771000 300700 Departmental overhead cost applied 815500 290040 Under or (over applied) overhead -44500 10660
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