Predetermined Factory Overhead Rate Poehling Medical Center has a single operati
ID: 2817446 • Letter: P
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 Depreciation expense Utilities Nurse salaries Technician wages $247,700 44,700 26,000 371,900 121,700 $812,000 Total operating room overhead The overhead costs will be assigned to procedures, based on the number of surgical room hours. Poeh days per week. In addition, the operating room will be shut down two weeks per year for general repairs. ling Medical Center expects to use the operating room an average of eight hours per day, seven a. Determine the predetermined operating room overhead rate for the year per hour Bill Harris had a 5-hour procedure on January 22. How much operating room overhead would be charged to his procedure, psing the rate determined in part (a)? c. During January, January were $55,000. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number the operating room was used 194 hours. The actual overhead costs incurred forExplanation / Answer
Annual operating room oveheads = $812,000
Annual room hours = Hours per day x days per week x number of weeks
= 8 x 7 x 50
= 2,800 hours
(a) Operating room overhead rate = Operating room overheads/Annual hours
= 812,000/2,800
= $290 per hour
(b) Operating room overhead chargeable to Bill Harris = Overhead rate per hour x Procedure hours
= 290 x 5
= $1,450
(c) In January, operating room was used for 194 hours.
Hence, estimated room overhead for the month of January = Monthly hours x Predetermined overhead rate
= 194 x 290
= $56,260
Actual room overheads = $55,000
Hence,overapplied operating room overhed = Estimated operating room overheads - Actual operating room overheads
= 56,260 - 55,000
= $1,260
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