**Predetermined Factory Overhead Rate**Novello Medical Center has a single operating room used by local physicians for surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes 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: $213,500- Depreciation expense: $38,500- Utilities: $22,400- Nurse salaries: $320,600- Technician wages: $105,000**Total operating room overhead: $700,000**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:** \[ \_\_\_\_\_ \text{ hours} \]b. **Determine the predetermined operating room overhead rate for the year:** \[ \_\_\_\_\_ \text{ per hour} \]c. **Conrad Goldsmith 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 (b)?** \[ \_\_\_\_\_ \]d. **During January, the operating room was used 194 hours. The actual overhead costs incurred for January were $47,400. Determine the overapplied operating overhead or underapplied operating overhead for the period.** \[ \_\_\_\_\_ \]

Overhead cost is considered as an indirect cost that should be allocated on the product on the basis of a predetermined overhead rate or activity base costing method.Answer a. Operating room hours per year = No. of hour per day * Days in a week * Number of week = 8 * 7 * ( 52 – 2 ) = 8 * 7 * 50 = 2,800 Answer 2 Predetermined operating room overhead rate = Total operating room overhead / Operating room hour per year = $ 700,000 / 2,800 = $ 250 Answer 3 Overhead applied = Operating hour used * Predetermined operating overhead rate = 4 * $ 250 = $ 1,000 Answer 4 Overhead over ( under applied ) = Overhead applied – Overhead incurred Overhead applied = 194 * 250 = 48500 Overhead incurred 47,500 Overapplied overhead 48,500 – 47,500 = $ 1,000 Over applied