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 Depreciation expense Utilities $309,900 77,600 33,100 288,100 Nurse salaries Technician wages 131,300 Total operating room overhead $840,000 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. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet a. Determine the predetermined operating room overhead rate for the year. Round your answer to the nearest dollar. per hour b. Bill Harris had a 4-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part (a)? Round your answer to the nearest dollar C. During January, the operating room was used 220 hours. The actual overhead costs incurred for January were $63,800. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number. Round your answer to the nearest dollar.

Answer 1

Number of surgical room hours = 8hours*7days*50weeks = 2,800 hours

a. Predetermined operating room overhead rate = Estimated operating room overhead / Estimated surgical room hours

Predetermined operating room overhead rate = $840,000 / 2,800 = $300 per surgical room hour

b. Operating room overhead charged = 4*$300 = $1,200

c. Applied overhead cost = 220*$300 = $66,000

Overapplied operating overhead = $66,000 - 63,800 = $2,200 Overapplied