Data P3-2:
Hobart, Evans and Nix 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 rate to charge the costs of these departments
to its clients. At the beginning of the year, the firm's management made the following estimates
for the year:
	Department
	Research &
	Documents	Litigation
Estimates, beginning of year:
Research-hours	24,000
Direct attorney-hours	9,000	18,000
Legal forms and supplies	$16,000	$5,000
Direct attorney cost	$450,000	$900,000
Departmental overhead cost	$840,000	$360,000
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: legal forms 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 418-3: was initiated on February 23 and completed on May 16. During this period the
following costs and time was recorded on the case:
	Department
	Research &
	Documents	Litigation
Research-hours	26
Direct attorney-hours	7	114
Legal forms and supplies	$80	$40
Direct attorney cost	$350	$5,700
Required:
1. Compute the predetermined overhead rate used during the year in the Research and
Documents Department. Compute the rate used in the Litigation Department.
2. Using the rates you computed in (1) above, compute the total overhead cost applied to Case
418-3.
3. What would be the total cost charged to Case 418-3? 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:
Actual data for all jobs during year:
Research-hours	26,000
Direct attorney-hours	8,000	15,000
Legal forms and supplies	$19,000	$6,000
Direct attorney cost	$400,000	$750,000
Departmental overhead cost	$870,000	$315,000
Determine the amount of under-or overapplied overhead cost in each department for they year.