Response to the following problem:
St. Lukes 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 July 1 of the current year, the annual operating room overhead is estimated to be:
Disposable supplies $ 330,000
Depreciation expense 59,400
Utilities 34,100
Nurse salaries 496,500
Technician wages 151,000
Total operating room overhead $1,071,000
The overhead costs will be assigned to procedures based on the number of surgical room hours. St. Lukes Medical Center expects to use the operating room an average of 10 hours per day, seven days per week. In addition, the operating room will be shut down one week per year for general and maintenance repairs.
a. Determine the predetermined operating room overhead rate for the year.
b. Vivian Kau had a 3.8-hour procedure on July 23. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?
c. During July, the operating room was used 280 hours. The actual overhead costs incurred for July were $83,175. Determine the overhead under- or overapplied for the period.