University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and...
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Accounting
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.
The following data appear in the company records for the current period:
Maintenance
Personnel
Printing
Developing
Machine-hours
1,000
1,000
3,000
Labor-hours
500
500
2,000
Department direct costs
$
12,000
$
35,750
$
41,750
$
31,000
University Printers estimates that the variable costs in the Personnel Department total $16,250 and in the Maintenance Department variable costs total $8,700. Avoidable fixed costs in the Personnel Department are $5,200.
Required:
If University Printers outsources the Personnel Department functions, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)
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