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Great Heart Clinic is a medical service institute that provides various services for its patients. The doctors working for the institute are required to fill
Great Heart Clinic is a medical service institute that provides various services for its patients. The doctors working for the institute are required to fill out a note in the medical system for each patient treated. The system then generates a unique bill for each patient according to the pricing for the specific service or treatment received. Included in each patient's bill is the applied overhead cost based on direct labor hours. The clinic created the following overhead budget for this year, but the actual overhead was $296,047. 10,000 Direct labor hours Overhead costs: Indirect material Indirect labor Utilities Insurance Property taxes Total 3,500 45,000 6,000 78,000 30,000 $ 162,500 During this year, the doctors actually charged a total of 12,190 hours as shown below. Doctor A Doctor B Doctor c Doctor D Doctor E Doctor F Total 2,000 1,850 1,960 2,100 2,500 1,780 12,190 The overhead variance is deemed material by the CEO, and he wonders why this variance happened and how to address this variance. The CEO is also considering implementing an activity-based costing (ABC) system. 5. Identify and explain the appropriate accounting treatment of this under or over applied overhead amount. 2. Calculate the applied overhead and identify if it is over or under applied. Show your calculations
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