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: $187,900 Disposable supplies Depreciation expense 33,900 Utilities 19,700 Nurse salaries 282,100 92,400 Technician wages Total operating room overhead $616,000 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 5-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 $41,700. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number.

Answer 1

Answers

• [a]

Total no of weeks in a year = 365 days / 7 days = 52 weeks.
2 weeks shutdown = 50 weeks in a year

A	Total Operating Room overhead	$616,000
B = 8 hours x 7 days x 50 weeks	Total expected no of hours in a year	2800
C = A/B	Predetermined overhead rate	$220	per hour

• [b]
  Overhead charged = 5 hour x $ 220 = $ 1100
• [c]
  >Actual Overhead = $ 41700
  >Overhead applied = 194 hours x $ 220 = $ 42,680
  >Applied overheads are MORE than actual overhead by $ 980 [42680 – 41700] = OVER APPLIED

Answer:
$ 980 Overapplied operating overhead.