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 $260
Sterile supply 1,030
Supplies, other 4,130
Operating room service (nursing staff) 4,480
Anesthesia 1,090
Anesthesiologist 3,220

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 $5,220,800, and the activity base is available hours of 2,080.

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.

Calculate the total cost for the knee surgery.

Explanation / Answer

Predetermined overhead rate:

= 5,220,800 / 2,080
= $2,150 per hour


Total overhead charge to Candice:

= 2,150 x 3
= $6,450

Calculate the total cost for the knee surgery:

Direct costs

Pharmacy $260
Sterile supply 1,030
Supplies, other 4,130
Operating room service (nursing staff) 4,480
Anesthesia 1,090
Anesthesiologist 3,220
Total=14210
Overhead charge = 6,450+14,210

Total Cost: $20,660.

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