Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded. Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs andservice department usage ratios were recorded.Using DepartmentMaintenanceSupplyingDepartmentProcessingAdministrationProcessingAdministrationBranchesElectronic50%10%60%20%$4,200,00040%40%50%$2,200,000Maintenance10%20%Direct cost$91,000$540,000$263,000The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows.AdministrationElectronicProcessing$65,00026,000$91,000MaintenanceBranches$153,000387,000$540,000$134,000129,000$263,000$1,600,0002,600,000$4,200,000$1,250,000950,000$2,200,000Variable costsFixed costsTotal costsAvoidable fixed costs$ 6,000$284,000$ 83,000$ 650,000$ 650,000Required:a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs?b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs?c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs?MaximumAmountProcessing Departmentа.b.Administration DepartmentMaintenance DepartmentC.

Definition: Outsourcing: It is a practice in business where a company hires the outside party to…

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Business

Accounting

costs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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