Predetermined Factory Overhead Rate Poehling Medical Center

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 $162,300 29,300 17,000 243,700 79,700 $532,000 Total operating room overhead 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 6-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 186 hours. The actual overhead costs incurred for January were $34,600. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number

Solution

Calculatuon of estimate number of operating room hours.

= Operating hours per day × save day per week × 52 week. ( no. Of week in the year )

= 8×7×52. = 2912

Calculation of operating overhead rate per hour.

= Total overhead / estimate operating hours in the year

= $532000/2912. =$182.69

calculatuon of 6 hours produced January 22 . Overhead cost

no. Of hours produced × Overhead rate

= 6×182.69 = $1096.14

Calculation of overhead applied in January month

= No.of operating hours × overhead rate

= 186 × $182.69

=$ 33980.34

Actual overhead cost incurred = $34600

Under applied overhead = overhead cost incurred - overhead cost applied

= $34600 - $33980.34

=$619.66