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 Nurse salaries 243,700 Technician wages 79,700 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 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. Calculate the estimated number of operating room hours for the year. hours b. Determine the predetermined operating room overhead rate for the year. per hour C. 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 (b)? $

Answer 1

1. Estimated number of operating room hours = 8 hours × 7 days × 50 weeks

= 2,800 hours

2. Predetermined overhead rate = $532,000/2,800

=$190 per operating room hour

3.

6 ×$190 =$1,140

4. Standard overhead cost =$190×186 =$35,340

Actual overhead =$34,600

Overapplied overhead = $35,340-$34,600 =$740 Overapplied