Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 12 su
ID: 2563971 • Letter: W
Question
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:
Department
Research and Documents Litigation
Research-hours 20,100 -
Direct attorney-hours 9,400 15,900
Materials and supplies $ 17,600 $ 4,900
Direct attorney cost $ 430,400 $ 800,500
Departmental overhead cost $ 723,600 $ 328,205
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 17 -
Direct attorney-hours 9 42
Materials and supplies $ 50 $ 28
Direct attorney cost $ 440 $ 1,900
Required: 1-a. Compute the predetermined overhead rate used during the year in the Research and Documents Department.
1-b. Compute the predetermined overhead rate used during the year in the Litigation Department.
2. Using the rates you computed in (1) above, compute the total overhead cost applied to Case 618–3.
3. What would be the total cost charged to Case 618–3? Show computations by department and in total for the case. 4. At the end of the year, the firm’s records revealed the following actual cost and operating data for all cases handled during the year:
Department
Research and Documents Litigation
Research-hours 22,900 -
Direct attorney-hours 7,800 14,800
Materials and supplies $ 19,200 $ 5,600
Direct attorney cost $ 399,300 $ 725,600
Departmental overhead cost $ 769,800 $ 299,600
Determine the amount of underapplied or overapplied overhead cost in each department for the year.
Explanation / Answer
1)predetermined overhead rate used during the year in the Research and Documents Department. =Estimated overhead /Estimated research hours
= 723600/20100
= $ 36 per research hour
1b)predetermined overhead rate used during the year in the Litigation Department=estimated overhead/ estimated direct attroney cost
= 328205/800500
= .41 or41%
2)total overhead cost applied to Case 618–3. =[actual research hours *rate]+[direct attroney cost*%]
[17*36]+[1900*.41]
=612+ 779
= $ 1391
3)Total cost charged to case :
4)
Materials and supplies [50+28] 78 Direct attorney cost [440+1900] 2340 overhead applied 1391 cost charged to case 3809Related Questions
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