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 $606,900 per year. Actual Medical Services Department costs for the most recent year were $106,600 for variable costs and $612,000 for fixed costs. Data concerning employees in the three operating departments follow: Budgeted number of employees Actual number of employees for the most recent year Long-run average number of employees. Cutting 606 506 840 Milling 285 385 560 Assembly 902 802 1,400 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?

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyz…