costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs Personnel Variable costs Fixed costs Total costs Avoidable fixed costs Legal Personnel $ 125,000 175,000 $ 300,000 $50,000 40 0 120 0 10,800 $ 300,000 5,400 $ 1,200,000 $ 160,000 Baldwin Enterprises estimates that the cost structure in its operations is as follows: Eastern Legal $ 41,000 119,000 $ 160,000 $ 20,000 Eastern $ 870,000 330,000 $ 1,200,000 $ 150,000 Western 40 1,800 $ 790,000 Western $ 560,000 230,000 $ 790,000 $ 150,000 Required: a. If Baldwin outsources the Legal Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If Baldwin outsources the Personnel Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If Baldwin outsources both the Personnel and the Legal Departments, what is the maximum it can pay an outside vendor without increasing total costs?

costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs Personnel Variable costs Fixed costs Total costs Avoidable fixed costs Legal Personnel $ 125,000 175,000 $ 300,000 $50,000 40 0 120 0 10,800 $ 300,000 5,400 $ 1,200,000 $ 160,000 Baldwin Enterprises estimates that the cost structure in its operations is as follows: Eastern Legal $ 41,000 119,000 $ 160,000 $ 20,000 Eastern $ 870,000 330,000 $ 1,200,000 $ 150,000 Western 40 1,800 $ 790,000 Western $ 560,000 230,000 $ 790,000 $ 150,000 Required: a. If Baldwin outsources the Legal Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If Baldwin outsources the Personnel Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If Baldwin outsources both the Personnel and the Legal Departments, what is the maximum it can pay an outside vendor without increasing total costs?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Dog

costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations
follows:
Employees
Hours
Department direct costs
Personnel
Variable costs
Fixed costs
Total costs
Avoidable fixed costs
Legal
0
120
10,800
$ 300,000
5,400
$ 1,200,000
Baldwin Enterprises estimates that the cost structure in its operations is as follows:
Personnel
$ 125,000
175,000
$ 300,000
$ 50,000
40
0
$ 160,000
Eastern
Legal
$ 41,000
119,000
$ 160,000
$ 20,000
Eastern
$ 870,000
330,000
$ 1,200,000
$ 150,000
Western
40
1,800
$ 790,000
Western
$ 560,000
230,000
$ 790,000
$ 150,000
Required:
a. If Baldwin outsources the Legal Department, what is the maximum it can pay an outside vendor without increasing total costs?
b. If Baldwin outsources the Personnel Department, what is the maximum it can pay an outside vendor without increasing total costs?
c. If Baldwin outsources both the Personnel and the Legal Departments, what is the maximum it can pay an outside vendor without
increasing total costs?

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