Southwest Community Hospital uses a job-order costing system to track charges fo

Question

Southwest Community Hospital uses a job-order costing system to track charges for each patient. The following charges relate to Candice O'Dea, who had laparoscopic knee surgery:



Pharmacy $280
Sterile supply 1,060
Supplies, other 4,160
Operating room service (nursing staff) 4,220
Anesthesia 1,100
Anesthesiologist 3,120

Southwest charges patients for the use of the operating room based on a predetermined overhead rate. The estimated overhead costs of the operating room are $5,842,000, and the activity base is available hours of 2,300.



Calculate the predetermined overhead rate for the operating room, and determine the overhead charge to Candice. Assume that her surgery took 3 hours in the operating room.

Predetermined overhead rate $
Total overhead charge to Candice $
Calculate the total cost for the knee surgery. $

Explanation / Answer

Predetermined overhead rate: = 5,842,000 / 2,300 = $2,540 per hour Total overhead charge to Candice: =2,540 x 3 = $7,620 Calculate the total cost for the knee surgery: Direct costs Pharmacy $280 Sterile supply 1,060 Supplies, other 4,160 Operating room service (nursing staff) 4,220 Anesthesia 1,100 Anesthesiologist 3,120 Overhead charge = 2,540 x 3= $7,620 Total Cost $21560

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