Question

Predetermined Factory Overhead Rate Poehling Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On January 1 of the current year, the annual operating room overhead is estimated to be: Disposable supplies $350,100 Depreciation expense 63,100 Utilities 36,700 Nurse salaries 525,800 Technician wages 172,300 Total operating room overhead $1,148,000 The overhead costs will be assigned to procedures based on the number of surgical room hours. Poehling Medical Center expects to use the operating room an average of eight hours per day, seven days per week. In addition, the operating room will be shut down two weeks per year for general repairs. a. Calculate the estimated number of operating room hours for the year. hours b. Determine the predetermined operating room overhead rate for the year. $ per hour c. Bill Harris had a 7-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part (b)? $ d. During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $77,800. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number. $

Answer 1

a. ESTIMATED NUMBER OF OPERATING ROOM HOURS FOR THE YEAR:

Total weeks per year = 52

Total weeks estimated to be operated = 50 (52-2)

Total estimated operating room hours per year

= 8hours * 7days* 50weeks = 2800 room hours

b. PREDETERMINED OPERATING ROOM OVERHEAD RATE PER HOUR:. = $1148000/2800hours = $410 per hour

c. OPERATING ROOM OVERHEAD CHARGED:

= $410 per hour * 7 hours = $2870

d. OVERHEADS UNDER APPLIED OR OVER APPLIED:

​​​​​​Overheads to be charged = 194hours * $410 per hour= $79540

Actual overheads incurred = 77800

Over Application of overheads = $79540 - $77800 = $1740