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 operatin accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operatin overhead. On January 1 of the current year, the annual operating room overhead is estimated to be: Disposable supplies $162,300 Depreciation expense 29,300 Utilities 17,000 Nurse salaries 243,700 79,700 Technician wages Total operating room overhead $532,000 The overhead costs will be assigned to procedures, based on the number of surgical room hours. Poehling Medical Center expects to use the opera 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 deter part (a)? c. During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $36,000. Determine the overapp operating overhead or underapplied operating overhead for the period. overapplied

Answer 1

Ans:

A). Predetermined overhead rate= Total Operating room overhead/ operating hours in a year

= $532,000/ {8 hours* 7 days*{52 weeks-2 weeks}

= $ 532,000/ {8 *7*50}

= $532,000/ 2,800

= $ 190 per hour

B). Overhead Applied= Operating hours used* predetermined rate per hour

= 3* $190

= $ 570

C). Overhead Over/ under applied=(Overhead applied- overhead incurred)

={ overhead rate * operating hours}- overhead incurred

= {190* 194- 36,000}

= {36,860-36,000}

= $860 ( overhead applied)