Please show your work Predetermined factory overhead rate Reithofer Medical Cent
ID: 2416643 • Letter: P
Question
Please show your work
Predetermined factory overhead rate
Reithofer Medical Center has a singe 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 Jan. 1, of the current year,the annual operating room overhead is estimated to be:
Disposable supplies $340,000
Depreciation expense $ 64,000
Utilties $ 26,000
Nurse salaries $312,400
Technician wages $131,000
____________
Total operating room
overhead $873,600
===============
The overhead costs will be assigned to procedures, based on the number of surgical room hrs. Reitofer 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 four weeks per year for general repairs.
a. Determine the predetermined operating room overhead rate for the year.
b. Wayne Lawrence had a four-hour procedure on Jan. 15. How much operating room overhead would be charged to his procedure, using the rate determined in part (a)?
c. During Jan, the operating room was used 232 hours. The actual overhead costs incurred for Jan. were $65,500. Determine the overhead under- or overapplied for the period.
Explanation / Answer
Answer a Calculation of Predetermined operating overhead rate Total weeks in a year = 52 weeks Operating room shutdown period in a year = 4 weeks Hnece working weeks = 48 weeks Total surgical room hours = 48 weeks * 7 days * 8 hours = 2688 hours Predetermined operating overhead rate = Total operating room overhead / Total surgical room hours Predetermined operating overhead rate = $873600 / 2688 hours Predetermined operating overhead rate = $325 per hour Answer b Operating room overhead charged to four hour procedure = 4 hours * $325 per hour = $1300 Answer c Operating room hours during Jan = 232 hours Operating room overhead charged during Jan = 232 hours * $325 per hour = $75400 Actual Overhead incurred for Jan = $65500 Hence Overhead overapplied during Jan = $75400 - $65500 = $9900