Question

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 $350,100

Depreciation expense 63,100

Utilities 36,700

Nurse salaries 525,800

Technician wages 172,300

Total operating room overhead $1,148,000

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

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

c. During January, the operating room was used 186 hours. The actual overhead costs incurred for January were $74,600. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number. $__________ overapplied

Answer 1

A)Number of surgical room hours = 8 hours a day * 7 per week *(52 weeks in a year-2Shut down) = 2800 hours

predetermined operating room overhead rate =Estimated overhead /estimated surgical room hours

                       = 1148000/ 2800

                        = $ 410 per hour

B)Overhead charged = 3* 410 =$ 1230

c)Overhead applied = 186*410 = 76260

Actual overhead = 74600

Overapplied / underapplied overhead =Actual -Applied

                        = 74600 - 76260

                         = 1660 overapplied