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 $162,300 Depreciation expense 29,300 Utilities 17,000 243,700 Nurse salaries Technician wages 79,700 $532,000 Total operating room overhead The overhead costs wi 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 6-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 186 hours. The actual overhead costs incurred for Jaruary were $34,600. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number

Answer 1

a. Predetermined overhead rate = Estimated operating overhead / Estimated surgical room hours

Estimated surgical room hours = 50 weeks*7 days*8 hours = 2,800 hours

Predetermined overhead rate = $532,000 / 2,800 = $190 per surgical room hours

b. Operating room overhead charged = 6 * $190 = $1,140

c. Over or under overhead applied for January = Actual overhead - Applied overhead

Over or under overhead applied for January = $34,600 - $35,340 (186*$190)

Over applied overhead = $740