Question

Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016.
Activity Cost Pools Estimated Overhead Expected Use of Cost Drivers per Activity
Researching legal Issues $31,500 900 research hours
Meeting with clients 1,760,000 8,800 professional hours
Preparing legal documents 480,000 30,000 pages
During 2016 the firm worked 660 research hours, prepared 25,000 document pages, and 10,000 professional hours.
Compute the total overhead applied during 2016.
Total overhead applied $_____

Answer 1

Answer:

Total overhead= $2,423,100

Explanation:

Giving the following information:

During 2016 the firm worked 660 research hours, prepared 25,000 document pages, and 10,000 professional hours.

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Researching= 31,500/900= $35 per research hour

Meeting with clients= 1,760,000/8,800= $200 per professional hour

Preparing legal documents= 480,000/30,000= $16 per page

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Researching= 35*660= $23,100

Meeting with clients= 200*10,000=$2,000,000

Preparing legal documents= 16*25,000= $400,000

Total overhead= $2,423,100