Reference no: EM131816161

Question - Predetermined factory overhead rate

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	$226,900
Depreciation expense	40,900
Utilities	23,800
Nurse salaries	340,800
Technician wages	111,600
Total operating room overhead	$744,000

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.

b. Gretchen Kelton had a 7-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 194 hours. The actual overhead costs incurred for November were $58,800. Determine the overapplied factory overhead or underapplied factory overhead for the period.