Question

A-C

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 $213,500 Depreciation expense 38,500 Utilities 22,400 Nurse salaries 320,600 Technician wages 105,000 Total operating room overhead $700,000 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 $47,400. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number.

Answer 1

Solution a . Determination of Operating room Overhead rate for the year Total working hours in a year ( 8 hours x 7days x 52weeks) (a) 2912 days Total Operating Room Overheads $ 7,00,000 Operating Room Overhead rate (b / a) $ 240.38 per hour (b) Solution b. Amount to be charged for 3-hour procedure (3 hours x $240.38) $ 721.15 Solution c. Operating Overheads (predetermined) (194 hours x $240.38) Actual Overhead costs Overapplied Operating Overheads $ 46,153.85 $ 47,400.00 $ 1,246.15

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