Korvanis Corporation operates a Medical Services Department for its employees. C
ID: 2594149 • 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 department.
Variable Medical Services Department costs are budgeted at $58 per employee. Fixed Medical Services Department costs are budgeted at $681,900 per year. Actual Medical Services Department costs for the most recent year were $106,900 for variable costs and $687,000 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.
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?
Unchaged cost:
Cutting Milling Assembly Budgeted number of employees 611 282 913 Actual number of employees for the most recent year 511 382 813 Long-run average number of employees 630 420 1,050 Korvanis Corporation operas a Mecical Savikes Dapartment for its employees. Charges to the company's operating departments for the variatle costs or the Medical Services Department are based on tha actual number of employees In each department. Charges for the "toed costs of the Medical Sevices Deparment are based on the long-run average number ofemployees In ech oparating deparment va able ledical Services Department costs are bud ered at SS8 er en loyee. Fl ed MedCal Senkes Department costs are bu eted a S681.900 per ear. Actual Medical Services Deoart ment costs orme mo recent ear were SIC 90C fo va a e costs an s 7 0001 r xed costs. Data conceming employees in the three operating deparments tollow: umber res co Budgcted number of employces Actual numoer of emploveee for the moat recant year Long run acrage number of emplcyccs 282 382 420 813 630 1. Dotermino the rAcdical Scrncos Dcpartmcnt chargCS 1CthC Year to oac n of the Operating dcpartmcms -cutting,ing, and Asscmbly. Medical services depertment charges 5 388 104 Ieical Svites the yeas g depaiiExplanation / Answer
Solution - 1:
Solution-2:
Part of the total actual cost is not charged to the operating departments as shown below:
The overall spending variance of $13,052 represents costs incurred in excess of the budgeted variable cost of $58 per employee and the budgeted fixed cost of $681,900. This $13,052 in uncharged costs is the responsibility of the Medical Services Department.
Distribution Medical Services Department Cost Particulars Basis of Allocation Cutting Milling Assembly Total Actual No of Employees 511 382 813 1706 Long Run Average Number of Employees 630 420 1050 2100 Variable Service Deparment Cost (58 * Actual Nos of Employees) Actual Nos of Employees $29,638.00 $22,156.00 $47,154.00 $98,948.00 Fixed Service Department Cost (Budgeted Fixed Cost * Long run avg number of employee in department / Total long run avg number of employee) Long Run Average number of employee $204,570.00 $136,380.00 340950 $681,900.00 Total Allocated Medical Service Department Cost $234,208.00 $158,536.00 $388,104.00 $780,848.00Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.