Predetermined factory overhead ratePoehling Medical Center has a single operating room that is used bylocal physicians to perform surgical procedures. The cost of using theoperating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physiciansurgical time, and operating room overhead. On January 1 of the currentyear, the annual operating room overhead is estimated to be: Disposable suppliesDepreciation expenseUtilitiesNurse salariesTechnician wagesTotal operating room overhead $295,60075,00032,000278,500126,900$812,000 The overhead costs will be assigned to procedures based on the numberof surgical room hours. Poehling Medical Center expects to use theoperating room an average of eight hours per day. Seven days per week.In addition, the operating room will be shut down two weeks per yearfor general repairs. a. Calculate the estimated number of operating room hours for theyear.b. Determine the predetermined operating room overhead rate forthe year.c. Bill Harris had a five-hour procedure on January 22. How much operating room overhead would be charged to his procedure, usingthe rate determined in part (b)?d. During January, the operating room was used 240 hours. Theactual overhead costs incurred for January were $67.250.Determine the overhead under- or overapplied for the period.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Predetermined factory
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 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 Depreciation expense Utilities Nurse salaries Technician wages Total operating room overhead |
$295,600 75,000 32,000 278,500 126,900 $812,000 |
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. Calculate the estimated number of operating room hours for the
year.
b. Determine the predetermined operating room overhead rate for
the year.
c. Bill Harris had a five-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using
the rate determined in part (b)?
d. During January, the operating room was used 240 hours. The
actual overhead costs incurred for January were $67.250.
Determine the overhead under- or overapplied for the period.
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