Job costing, service sector Mercy Hospital uses a job costing system for all patients who have surgery. The hospital uses a budgeted overhead rate for allocating overhead to patient stays. In March, the operating room had a budgeted allocation base of 1,000 operating hours. The budgeted operating room overhead costs were
$66,000. Patient Dwight Schuller was in the operating room 4 hours during March. Other costs related to Schuller’s 4–hour surgery include:
Patient medicine $ 250
Cost of nurses 3,500
Cost of supplies 800
Physician cost is not included because physicians bill patients separately from the hospital billing system.
REQUIRED:
1. Explain why the hospital uses a job costing system instead of a process costing system.
2. Determine the budgeted (i.e., estimated) overhead rate for the operating room.
3. Determine the total hospital costs of Schuller’s four–hour surgery.
