Reference no: EM1311231
Determine the under applied overhead in ligitation department.
Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 10 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 t 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
|
20,000
|
-
|
|
Direct attorney-hours
|
9,000
|
16,000
|
|
Materials and supplies
|
$18,000
|
$5,000
|
|
Direct attorney cost
|
$430,000
|
$800,000
|
|
Departmental overhead cost
|
$700,000
|
$320,000
|
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 attorney cost.
The costs charged to each client are made up of three elements: materials and supplies used, direct attorney cost 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
|
18
|
-
|
|
Direct attorney-hours
|
9
|
42
|
|
Materials and supplies
|
$50
|
$30
|
|
Direct attorney cost
|
$410
|
$2,100
|
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.