Winder, Knotter, and Nale is a small law firm that has 10 partners and 10 support people. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departmentsthe 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-hours Direct lawyer-hours Materials and supplies Direct lawyer cost Departmental overhead cost Research and Documents Litigation 21,700 9,850 17,700 $ 21,400 $ 6,700 $ 462,950 $885,000 $ 737,800 $265,500 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 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 Litigation Research and Documents 35 26 $ 84 $1,170 Research-hours Direct lawyer-hours Materials and supplies Direct lawyer cost 59 $ 47 $2,950 1. Compute the predetermined overhead rate used during the year in the Research and Documents Department. Compute the rate used in the Litigation Department. Predetermined Overhead Rate per hour Research & Documents department Litigation department 2. Compute the total overhead cost applied to Case 618-3. Total overhead cost 3. What is the total cost charged to Case 618-3? Show computations by department and in total for the case. Department Research & Documents Litigation Total Materials and supplies Direct attorney cost Overhead cost applied Total cost $ $ $ 0 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-hours Direct lawyer-hours Materials and supplies Direct lawyer cost Departmental overhead cost Research and Documents Litigation 24,600 9,020 16,530 $ 22,300 $ 7,600 $451,000 $798,950 $799,500 $247,700 Determine the amount of underapplied or overapplied overhead cost in each department for the year. Research & Documents department Litigation department
