The medical services department of Carey Company budgeted $20 of variable medical expenses per employee for May, based on 1,000 employees in operating departments. During May an average of 1,050 employees were employed in operating departments. Actual variable medical expenses totaled $23,100 for the month. How much variable medical expenses should be charged to operating departments at the end of May for performance evaluation purposes?

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The budgeted variable medical expenses for May are $20 x 1,000 employees = $20,000. The actual variable medical expenses for May are $23,100. The difference between the actual and budgeted expenses is $23,100 - $20,000 = $3,100. This difference is due to the fact that the average number of employees in operating departments was 1,050, which is 50 more than the budgeted number of employees. The additional 50 employees incurred $3,100 in variable medical expenses. Therefore, the variable medical expenses that should be charged to operating departments at the end of May for performance evaluation purposes are $20,000 + $3,100 = $23,100.

The Medical Services Department of Carey Company Budgeted $20 of Variable