Predetermined Factory Overhead Rate

Novello 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		$239,100
Depreciation expense		43,100
Utilities		25,100
Nurse salaries		359,100
Technician wages		117,600
	Total operating room overhead	$784,000

The overhead costs will be assigned to procedures based on the number of surgical room hours. Novello 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 two weeks per year for general repairs.

a. Compute the estimated number of operating room hours for the year. fill in the blank 1 hours

b. Determine the predetermined operating room overhead rate for the year. $fill in the blank 2 per hour

c. Conrad Goldsmith had a 8-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part (b)? $fill in the blank 3

d. During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $53,100. Determine the overapplied operating overheador underapplied operating overhead for the period. $fill in the blank 4

overappliedunderappliedoverapplied

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b. Use estimated annual operating room hours and estimated annual operating room overhead to find the predetermined overhead rate.

c. Apply the predetermined overhead rate to the hours of actual surgery.

d. Apply the predetermined overhead rate to the actual hours. Compare the actual overhead cost and the applied overhead cost.