QUESTION 3 Samuel, Marcus, James and Associates is a small law firm that employs 10 partners and 12 support persons. The firm uses a job-order costing system to accumulate costs chargeable to each client, and it is organised 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. The pre-determined overhead rate in the Research and Document 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 cost incurred, and an applied amount of overhead from each department in which work is performed in the case. At the beginning of the year, the firm's management made the following estimates for the year. Department Research and Documents Litigation Research-hours 24,000 Direct attorney-hours 9,000 18,000 Legal forms and supplies RM16,000 RM5,000 Direct attorney cost Departmental overhead cost RM450,000 RM900,000 RM840,000 RM360,000 Case 9-1-11 was initiated on 2 January and completed on May 15. During this period, the following costs and time were recorded on the case: Department Research and Documents Litigation Research-hours 26 Direct attorney-hours Legal forms and supplies Direct attorney cost 7 114 RM80 RM40 RM350 RM5,700 Required: 1. Calculate the predetermine overhead rate used during the year in the: a. Research and Document Department; b. Litigation Department. 2. Using the rates you calculated in (1) above, calculate the total cost applied of
QUESTION 3 Samuel, Marcus, James and Associates is a small law firm that employs 10 partners and 12 support persons. The firm uses a job-order costing system to accumulate costs chargeable to each client, and it is organised 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. The pre-determined overhead rate in the Research and Document 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 cost incurred, and an applied amount of overhead from each department in which work is performed in the case. At the beginning of the year, the firm's management made the following estimates for the year. Department Research and Documents Litigation Research-hours 24,000 Direct attorney-hours 9,000 18,000 Legal forms and supplies RM16,000 RM5,000 Direct attorney cost Departmental overhead cost RM450,000 RM900,000 RM840,000 RM360,000 Case 9-1-11 was initiated on 2 January and completed on May 15. During this period, the following costs and time were recorded on the case: Department Research and Documents Litigation Research-hours 26 Direct attorney-hours Legal forms and supplies Direct attorney cost 7 114 RM80 RM40 RM350 RM5,700 Required: 1. Calculate the predetermine overhead rate used during the year in the: a. Research and Document Department; b. Litigation Department. 2. Using the rates you calculated in (1) above, calculate the total cost applied of
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:QUESTION 3
Samuel, Marcus, James and Associates is a small law firm that employs 10 partners and 12
support persons. The firm uses a job-order costing system to accumulate costs chargeable to
each client, and it is organised 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.
The pre-determined overhead rate in the Research and Document 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 cost incurred, and an applied amount of overhead from each
department in which work is performed in the case.
At the beginning of the year, the firm's management made the following estimates for the
year.
Department
Research and
Documents
Litigation
Research-hours
24,000
Direct attorney-hours
Legal forms and supplies
9,000
18,000
RM16,000
RM5,000
Direct attorney cost
RM450,000
RM900,000
Departmental overhead cost
RM840,000
RM360,000
Case 9-1-11 was initiated on 2 January and completed on May 15. During this period, the
following costs and time were recorded on the case:
Department
Research and
Documents
Litigation
Research-hours
26
Direct attorney-hours
Legal forms and supplies
7
114
RM80
RM40
Direct attorney cost
RM350
RM5,700
Required:
1. Calculate the predetermine overhead rate used during the year in the:
a. Research and Document Department;
b. Litigation Department.
2. Using the rates you calculated in (1) above, calculate the total cost applied of
Transcribed Image Text:Case 9-1-11.
3. 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 and
Documents
Litigation
Research-hours
26,000
Direct attorney-hours
Legal forms and supplies
Direct attorney cost
Departmental overhead cost
8,000
RM19,000
RM400,000
15,000
RM6,000
RM750,000
RM870,000
RM315,000
Calculate the amount of under-absorbed or over absorbed overhead cost in each
department for the year.
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