Reed 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 fi xed 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 $60 per employee. Fixed Medical
Services Department costs are budgeted at $600,000 per year. Actual Medical Services Department costs for the most recent year were $105,400 for variable costs and $605,000 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 allocated to the operatingdepartments?

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Cutting Milling Assembly Budgeted number of employees … Actual number of employees for the most recert year Long-run average number of employees 300 400 600 400 ,000 600 500 900 800