Predetermined Factory Overhead Rate Poehling 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 indudes 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 $281,800 Depreciation expense 50,800 Utilities 29,600 Nurse salaries 423,200 Technician wages 138,600 Total operating room overhead $924,000 The overhead costs will be assigned to procedures, based on the number of surgical room hours. Poehling 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. Determine the predetermined operating room overhead rate for the year. per hour b. Bill Harris had a 4-hour procedure on January 22. 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 186 hours. The actual overhead costs incurred for January were $60,000. Determine the overapplied operating overhead or underapplied operating overhead for the period. Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 2013, the company began production of a leather cover for tablet computers, called the iLeather. The cover is made of stitched leather with a velvet interior and fits snugly around most tablet computers. In January, $763,000 was spent on developing marketing and advertising materials. For the first six months of 2043, the company spent an additional $1,401,000 promoting the iLeather. The product was ready for manufacture on January 21, 20Y3. Technology Accessories Inc. uses a job order cost system to accumulate costs for the iLeather. Direct materials unit costs for the iLeather are as follows: Leather $10.00 Velvet 5.00 Packaging 0.40 Total $15.40 The actual production process for the iLeather is fairly straightforward. First, leather is brought to a cutting and stitching machine. The machine cus the leather and stitches an exterior edge into the product. The machine requires one hour per 130 iLeathers. After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the iLeather for shipping. The direct labor cost for this work is $0.50 per unit. The completed packages are then sold to retail outlets through a sales force. The sales force is compensated by a 20% commission on the wholesale price for all sales. Total completed production was 520,000 units during the year. Other information is as follows: Number iLeather units sold in 2013 480,000 Wholesale price per unit $40 Factory overhead cost is applied to hear the Factory overhead cost is applied to jobs at the rate of $1,300 per machine hour. There were an additional 22,000 cut and stitched iLeathers waiting to be assembled on December 31, 20Y3. In your computations, if required, round interim per unit costs to two decimal places and final answers to the nearest whole dollar. Required: 1. Prepare an annual income statement for the iLeather product. Technology Accessories Inc. Income Statement For the Year Ended December 31, 2013 Selling Expenses: Total Selling Expenses Total Selling Expenses Finished Goods 2. Determine the balances in the finished goods and work in process inventories for the Leather product on December 31, 2013 Work in Process
