Question

Winder, Knotter, and Nale is a small law firm that has 10 partners and 10 support people. The firm employs a job-order costings to accumulate costs chargeable to each client, and it is organized into two departments-the Research and Documents Depart and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments to its clie the beginning of the current year, the firm's management made the following estimates for the year: Department Litigation Research-hours Direct lawyer-hours Materials and supplies Direct lawyer cost Departmental overhead cost Research and Documents 21,400 9,700 $ 20,800 $ 455,900 $727,600 17,400 $ 6,400 $ 870,000 $261,000 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 lawyer cost. The costs charged to each client are made up of three elements: materials and supplies used, direct lawyer costs incurred, and 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 reco the case: Department Research and Documents Litigation 32 23 Research-hours Direct lawyer-hours Materials and supplies Direct lawyer cost $ 78 $1,035 56 $ 44 $2,800 Required: 1. Compute the predetermined overhead rate used during the year in the Research and Documents Department. Compute the used in the Litigation Department. Predetermined Overhead Rate Research & Documents department per hour Litigation department 이이이

Answer 1

Predetermined rate = Estimated overhead costs/Estimated Driver
Research & Documents	34	per research hour
Litigation	30%	of Direct lawyer cost
Total overhead applied = Driver Consumed*Predetermined rate	1928
3
	R&D	Litigation	Total
Material and Supplies	78	44	122
Direct Attorney Cost	1035	2800	3835
Overhead	1088	840	1928
Total cost	2201	3684	5885
	Actual overhead	Applied	Difference
R&D	789750	826200	-36450	Overapplied
Litigation	243600	235770	7830	Underapplied

B C D E 1 Predetermined rate = Estimated overhead costs/Estimated Driver 2 Research & Documents 3 Litigation =727600/21400 per research hour =261000/870000 of Direct lawyer cost 4 5 Total overhead applied = Driver Consumed * Predetermined rate =B2*32+B3*2800 73 8 9 Material and Supplies 10 Direct Attorney Cost 11 Overhead 12 Total cost R&D 78 1035 =32*34 =SUM(B9:B11) Litigation 44 2800 =C10*30% ESUM(C9:C11) Total =B9+C9 =B10+C10 =B11+C11 =B12+C12 13 14 15 R&D 16 Litigation Actual overhead Applied 789750 =24300*34 243600 =785900*30% Difference =B15-C15 Overapplied =B16-C16 Underapplied 2600