Reithofer Medical Center has a single operating room that is used by local physi
ID: 2425024 • Letter: R
Question
Reithofer 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 ............ $ 340,000 Depreciation expense ............ 64,000 Utilities ................ 26,000 Nurse salaries ............... 312,400 Technician wages ............ 131,200 Total operating room overhead ........ $ 873,600 The overhead costs will be assigned to procedures, based on the number of surgical room hours. Reithofer 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 January 15. 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 232 hours. The actual overhead costs incurred for January were $ 65,500. Determine the overhead under- or overapplied for the period.
Explanation / Answer
Particulars Amount $ Disposable Supplies 340,000 Depreciation 64,000 Utilities 26,000 Nurse Salaries 312,400 Technician Wages 131,200 Total 873,600 Hrs per Year 365*7*8 Total Hrs 20,440 A) Rate Per Hr = 873600/20440 OH Rate per Hr 43 Four Hr Procedure: Hrs per Year 365*7*4 Total Hrs 10,220 B) Rate Per Hr = 873600/10220 OH Rate per Hr 85 It Doubles Compared to A) C) Hrs in Jan 232 Applied Overhead 65,500 Standard Overhead 43*232 9,976 Over Applied OH 55,524