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 $1,290
Supplies, other $4,050
Operating room service $4,490
Anesthesia $1,160
Anesthesiologist $3,030

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 $6,322,200, and the activity base is available hours of 2,460

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: = 6,322,200 / 2,460 = $2,570 per hour Total overhead charge to Candice: = 2,570 x 3 = $7,710 Calculate the total cost for the knee surgery: Direct costs Pharmacy $280 Sterile Supply $1,290 Supplies, other $4,050 Operating room service $4,490 Anesthesia $1,160 Anesthesiologist $3,030 $14,300 Overhead charge = 2,570 x 3 $7,710 Total Cost $22,010 =======

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