Korvanis Corporation operates a Medical Services Department for its employees. C
ID: 2525108 • Letter: K
Question
Korvanis Corporation operates a Medical Services Department for its employees. Charges to the company's operating departments for the variable costs of the Medical Services Department are based on the actual number of employees in each department. Charges for the fixed costs of the Medical Services Department are based on the long-run average number of employees in each operating Variable Medical Services Department costs are budgeted at $56 per employee. Fixed Medical Services Department costs are budgeted at $691,700 per year. Actual Medical Services Department costs for the most recent year were $105,300 for variable costs and $697,000 for fixed costs. Data concerning employees in the three operating departments follow 616 516 1,200 289 389 800 904 804 2,000 Budgeted number of employees Long-run average number of employees Required: 1. Determine the Medical Services Department charges for the year to each of the operating departments-Cutting, Milling, and Assembly Cutting Milling Assembly Medical services department charges 2. How much, if any, of the actual Medical Services Department costs for the year should not be charged to the operating departments? Uncha costExplanation / Answer
SOLUTION
1.
2.
The overall spending variance of $14,896 represents costs incurred in excess of the budgeted variable cost of $56 per employee and the budgeted fixed costs of $691,700. This $14,896 in uncharged costs is the responsibility of the Medical Services department.
Long run Average number of employees Percentage Cutting Department 1,200 30% Milling Department 800 20% Assembly Department 2,000 50% Total 4,000 100%Related Questions
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