Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $180,000 Assembly 65,000 Maintenance 35,000 — 0.2 0.5 0.3 Cafeteria 30,000 0.8 — 0.1 0.1 Caro estimates that the variable costs in the Maintenance Department total $11,000, and in the Cafeteria variable costs total $18,000. Avoidable fixed costs in the Maintenance Department are $10,000. Required: If Caro outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.) Maximum Amount:
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:
| Proportion of Services Used by | |||||
| Department | Direct Costs | Maintenance | Cafeteria | Machining | Assembly |
| Machining | $180,000 | ||||
| Assembly | 65,000 | ||||
| Maintenance | 35,000 | — | 0.2 | 0.5 | 0.3 |
| Cafeteria | 30,000 | 0.8 | — | 0.1 | 0.1 |
Caro estimates that the variable costs in the Maintenance Department total $11,000, and in the Cafeteria variable costs total $18,000. Avoidable fixed costs in the Maintenance Department are $10,000.
Required:
If Caro outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)
| Maximum Amount: |
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