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 $256,200 Depreciation expense 46,200 Utilities 26,900 Nurse salaries 384,700 Technician wages 126,000 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. a. Determine the predetermined operating room overhead rate for the year. per hour b. Bill Harris had a 3-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part (a)? c. During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $56,900. Determine the overapplied operating overhead or underapplied operating overhead for the period. $

Answer 1

a
Total operating room overhead	840000
Divide by total hours	2800	=(52-2)*7*8
Predetermined operating room overhead	300	per hour
b
Operating room overhead	900	=3*300
c
Applied overhead costs	58200	=194*300
Less: Actual overhead costs	56900
Overapplied Operating overhead	1300