Mt Ellis 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 March 1 of the current year, the annual operating room overhead is estimated to be:
Disposable supplies .............................. $ 120,000
Depreciation expense .............................. 115,000
Utilities ................................................ 90,000
Nurse salaries ....................................... 675,000
Technician wages .................................. 260,000
Total operating room overhead ............... $1,260 000
The overhead costs will be assigned to procedures based on the number of surgical room hours. Mt Ellis Medical Center expects to use the operating room an average of 12 hours per day, seven days per week. In addition, the operating room will be shut down two weeks per year for general and maintenance repairs.
a. Determine the predetermined operating room overhead rate for the year.
b. Shirlee Greer had a 3.4-hour procedure on March 18. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?
c. During March, the operating room was used 330 hours. The actual overhead costs incurred for March were $101,750. Determine the overhead under- or overapplied for the period.