Question
I need the solution for problem 22 in Chapter for in Managerial Accounting for Managers 3rd edition Noreen, Brewer, and Garrison. Showing all steps Problem
I need the solution for problem 22 in Chapter for in Managerial Accounting for Managers 3rd edition Noreen, Brewer, and Garrison. Showing all steps
Problem 4-22 Multiple Departments; Overhead Rates; Underapplied or Overapplied Overhead
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 cost chargeable to each client, and it 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 | 20,000 | --------- | ||||
Direct attorney hour | 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 o 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 o 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 |
Required:
1. Compute the predetermined overhead rates used during the year in the Research and Documents Department and the Litigation Department
2. Using the rates you computed in (1) above, compute the total overhead cost applied to Case 618-3? Show computations by department and in total for the case.
3. What would be the total cost chaged 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 this year:
Department | |||||
Research and Documents | Litigation | ||||
Research hours | 23,000 | -------- | |||
Direct attorney hours | 8,000 | 15,000 | |||
Materials and supplies | $19,000 | $6,000 | |||
Direct attorney cost | $400,000$ | $275,000 | |||
Departmental overhead cost | $770,000 | $300,000 |
Determine the amount of underapplied or overapplied overhead cost in each department for the year.
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