Q1) Winkle, Kotter, and Zale is small law firm which contains 10 partners and 10 support persons. Firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments-Research and Documents Department and Litigation Department. Firm utilizes predetermined overhead rates to charge costs of these departments its clients. At the stating of the present year, firm's management made following evaluates for 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 |
Predetermined overhead rate in Research and Documents Department is based on research-hours, and rate in Litigation Department is based on direct attorney cost.
Costs charged to each client are made up of three elements: materials and supplies used, direct attorney cost incurred, and applied amount of overhead from each department in which work is performed on case.
Case 618-3 was initiated on February 10 and completed on June 30. In this period, following costs and time were recorded on 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 |
problem:
find out predetermined overhead rate used during year in Research and Documents Department. find out rate used in Litigation Department.