Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively. Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production. The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

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Answer 1

Question

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

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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…

Exercise 11-15 (Algo) Service Department Charges [LO11-4] 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. ces Variable Medical Services Department costs are budgeted at $59 per employee. Fixed Medical Services Department costs are budgeted at $643,700 per year. Actual Medical Services Department costs for the most recent year were $106,000 for variable costs and $649,000 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 600 500 750 Medical services department charges Cutting Milling…

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 $683,200 per year. Actual Medical Services Department costs for the most recent year were $105,800 for variable costs and $689,000 for fixed costs. Data concerning employees in the three operating departments follow: Cutting Milling Assembly Budgeted number of employees 604 287 918 Actual number of employees for the most recent year 504 387 818 Long-run average number of employees 720 480 1,200 Required: 1. Determine the Medical Services…

Answer 2

Question

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

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Answer 3

Question

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

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Answer 4

Question

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

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Answer 5

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

Answer 6

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

Answer 7

Chapter 11, Problem 11.15E

1.

To determine

Introduction: Total variable costs have a direct relationship with the activity base. It increases or decreases in approximate proportion to increase or decrease in the activity base respectively.

Total fixed costs do not change with the change in activity base provided that activities are performed within the relevant range. Fixed costs are period costs such as rent, interest on loans, and depreciation. These costs have to be paid whether production occurs or not. That is why fixed costs remain the same at all levels of production.

The Medical Services Department charges the Cutting Department, Milling Department, and Assembly Department.

Answer 8

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

Answer 9

2.

To determine

Introduction: Spending variance shows the relationship between the budgeted cost and the actual cost incurred. If the budgeted cost is more than the actual cost incurred, then it is termed a favorable spending variance and vice versa.

The costs that should be treated as a spending variance and not charged to the operating departments.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 11 - Prob. 11.1Q Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Prob. 11.5Q Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - Prob. 11.8Q Ch. 11 - Prob. 11.9Q Ch. 11 - Why is using sales dollars as an allocation base...

Solution Summary: The author explains that total variable costs have a direct relationship with the activity base. Fixed costs are period costs such as rent, interest on loans, and depreciation.

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