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    The Medical Center - Predetermined Factory overhead rate

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    The 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 November 1 of the current year, the annual operating room overhead is estimated to be:

    Disposable supplies $219,600
    Depreciation expense 39,600
    Utilities 23,000
    Nurse salaries 329,800
    Technician wages 108,000
    Total operating room overhead $720,000

    The overhead costs will be assigned to procedures based on the number of surgical room hours. The Medical Center expects to use the operating room an average of eight hours per day, six 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. Gretchen Kelton had a 8-hour procedure on November 10. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?

    c. During November, the operating room was used 186 hours. The actual overhead costs incurred for November were $54,600. Determine the overapplied factory overhead or underapplied factory overhead for the period. Enter your answer as a positive number.

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    Solution Preview

    a. Total operating room overhead $720,000 / total operating ...

    Solution Summary

    Formula and computations shown for you.