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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 $56 per employee. Fixed Medical Services Department costs are budgeted at $669,000 per year. Actual Medical Services Department costs for the most recent year were $105,700 for variable costs and $675,000 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 not be charged to the operating departments?
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