Assembly Cutting 170 Milling Budgeted number of employees .. Actual number of employees for the most recent year Long-run average number of employees.... 100 280 150 180 270 80 120 300
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Service Department Charges
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 department.
Variable Medical Services Department costs are budgeted at $80 per employee. Fixed Medical Services Department costs are budgeted at $400,000 per year. Actual Medical Services Department costs for the most recent year were $41,000 for variable costs and $408,000 for fixed costs. Data concerning employees in the three operating departments follow:
Required:
1. Determine the Medical Services Department charges for the year to each of the operating departments—Cutting, Milling, and Assembly.
2. How much, if any, of the actual Medical Services Department costs for the year should be treated as a spending variance and not charged to the operating departments?
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