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 $57 per employee. Fixed Medical Services Department costs are budgeted at $639,300 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs and $645,000 for fixed costs. Data concerning employees in the three operating departments follow: Budgeted number of employees Cutting 604 Milling 293 Assembly 918 Actual number of employees for the most recent year 504 Long-run average number of employees 1,050 393 700 818 1,750 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?
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 $57 per employee. Fixed Medical Services Department costs are budgeted at $639,300 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs and $645,000 for fixed costs. Data concerning employees in the three operating departments follow: Budgeted number of employees Cutting 604 Milling 293 Assembly 918 Actual number of employees for the most recent year 504 Long-run average number of employees 1,050 393 700 818 1,750 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $57 per employee. Fixed Medical Services Department costs are
budgeted at $639,300 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs
and $645,000 for fixed costs. Data concerning employees in the three operating departments follow:
Budgeted number of employees
Cutting
604
Milling
293
Assembly
918
Actual number of employees for the most
recent year
504
393
Long-run average number of employees
1,050
700
818
1,750
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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