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

$275,600

Depreciation expense

82,000

Utilities

45,700

Nurse salaries

329,900

Technician wages

218.800

Total operating room overhead

$952,000

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.

2,800

V hours

b. Determine the predetermined operating room overhead rate for the year.

340

per hour

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

2.040

d. During January, the operating room was used 235 hours. The actual overhead costs incurred for January were $69,300. Determine the overapplied operating overhead or

underapplied operating overhead for the period.