Question

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 $290,400 Depreciation expense 52,400 Utilities 30,500 Nurse salaries 436,000 Technician wages 142,700 Total operating room overhead $952,000

Answer 1

a)

Estimated number of operating room hours for the year = Number of operating hours in a day x Operating days in week x Number of operating weeks

= 8 x 7 x 50

= 2,800

Predetermined overhead rate = Estimated overheads/Estimated operating room hours

= 952,000/2,800

= $340 per operating room hour

b)

Overhead applied = Actual operating room hours used x  Predetermined overhead rate

= 6 x 340

= $2,040

c)

Overhead applied in January = Actual operating room hours used x  Predetermined overhead rate

= 186 x 340

= $63,240

Actual overheads = $61,800

Over applied overhead = Overhead applied - Actual overhead

= 63,240 - 61,800

= $1,440

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