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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and ACcounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 25 15 60 50,000 10,000 40,000 Department direct costs $59,000 $23,000 $153,500 $601,000 BluStar estimates that the cost structure in its operations is as follows. AdministrationAccounting Domestic International $ 5,600 17,400 Variable costs $27,000 $110,000 $433,000 Fixed costs 32,000 43,500 168,000 Total costs $59,000 $23,000 $153,500 $601,000 Avoidable fixed costs $10,000 $ 4,600 $ 21,500 $113,500 Required: a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs? Complete this question by entering your answers in the tabs below.

BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and ACcounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 25 15 60 50,000 10,000 40,000 Department direct costs $59,000 $23,000 $153,500 $601,000 BluStar estimates that the cost structure in its operations is as follows. AdministrationAccounting Domestic International $ 5,600 17,400 Variable costs $27,000 $110,000 $433,000 Fixed costs 32,000 43,500 168,000 Total costs $59,000 $23,000 $153,500 $601,000 Avoidable fixed costs $10,000 $ 4,600 $ 21,500 $113,500 Required: a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs? Complete this question by entering your answers in the tabs below.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.9E: Profit center responsibility reporting On-Demand Sports Co. operates two divisions—the Action Sports...
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nent and Allocation Assignment 1 Saved BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 25 15 60 50,000 10,000 40,000 Department direct costs $59,000 $23,000 $153,500 $601,000 BluStar estimates that the cost structure in its operations is as follows. Variable costs Fixed costs AdministrationAccounting Domestic International $ 5,600 17,400 $27,000 32,000 $110,000 43,500 $433,000 168,000 Total costs $59,000 $23,000 $153,500 $601,000 Avoidable fixed costs $10,000 $4,600 $ 21,500 $113,500 Required: a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs? Complete this question by entering your answers in the tabs below. Required A Required B Required C If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)
Transcribed Image Text:nent and Allocation Assignment 1 Saved BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 25 15 60 50,000 10,000 40,000 Department direct costs $59,000 $23,000 $153,500 $601,000 BluStar estimates that the cost structure in its operations is as follows. Variable costs Fixed costs AdministrationAccounting Domestic International $ 5,600 17,400 $27,000 32,000 $110,000 43,500 $433,000 168,000 Total costs $59,000 $23,000 $153,500 $601,000 Avoidable fixed costs $10,000 $4,600 $ 21,500 $113,500 Required: a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs? Complete this question by entering your answers in the tabs below. Required A Required B Required C If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)
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