Predetermined Factory Overhead Rate Poehling Medical Center has a single operati

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:

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.

b. Determine the predetermined operating room overhead rate for the year.
$ per hour

c. Bill Harris had a 3-hour procedure on January 22. How much operating room overhead would be charged to her procedure, using the rate determined in part (b)?
$

d. During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $68,300. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number.
$ overapplied

Disposable supplies $307,400 Depreciation expense 55,400 Utilities 32,300 Nurse salaries 461,700 Technician wages 151,200 Total operating room overhead $1,008,000

Explanation / Answer

a) Estimated No. of Operating room hours :-

= 8 Hours * 7 Days * 50 Weeks

= 2800 hours

b) Predetermined Operating Room Overhead Rate :-

Total Operating Room Overhead = $1008000

Predetermined Overhead Rate = Total Operating Room Overhead / Total No. of Operating room hours

= $1008000 / 2800h

= $360 per hour

c) Operating room overhead charged = 3 h * $360 = $1080

d) Actual Overhead = $68300

Overhead Applied = 194 h * $360

= $69840

Overhead Over Applied = $68300 - $69840 = $1540

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