Exercise 11-37 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-1, 2) Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month c March follow: Department Fabricating Finishing Repair Quality Control Direct Costs $ 135,600 100, 200 42,900 80,100 Maximum Amount Proportion of Services Used by Quality Control Repair 0 0.3 0.3 0 Fabricating Finishing 0.6 0.1 0.1 0.6 Mack Precision Tool and Die estimates that the variable costs in the Repair Department total $15,225, and in Quality Control variable costs total $39,200. Avoidable fixed costs in the Repair Department are $12,400. Required: If Mack Precision Tool and Die outsources the Repair Department, what is the maximum it can pay an outside vendor without increasing total costs? Note: Do not round intermediate calculations.

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Exercise 11-37 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-1, 2)
Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and
Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month of
March follow:
Department
Fabricating
Finishing
Repair
Quality Control
Direct Costs
$ 135,600
100,200
42,900
80,100
Maximum Amount
Proportion of Services Used by
Quality
Control
Repair
0
0.3
0.3
0
Fabricating Finishing
0.6
0.1
0.1
0.6
Mack Precision Tool and Die estimates that the variable costs in the Repair Department total $15,225, and in Quality Control variable
costs total $39,200. Avoidable fixed costs in the Repair Department are $12,400.
Required:
If Mack Precision Tool and Die outsources the Repair Department, what is the maximum it can pay an outside vendor without
increasing total costs?
Note: Do not round intermediate calculations.
Transcribed Image Text:Exercise 11-37 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-1, 2) Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month of March follow: Department Fabricating Finishing Repair Quality Control Direct Costs $ 135,600 100,200 42,900 80,100 Maximum Amount Proportion of Services Used by Quality Control Repair 0 0.3 0.3 0 Fabricating Finishing 0.6 0.1 0.1 0.6 Mack Precision Tool and Die estimates that the variable costs in the Repair Department total $15,225, and in Quality Control variable costs total $39,200. Avoidable fixed costs in the Repair Department are $12,400. Required: If Mack Precision Tool and Die outsources the Repair Department, what is the maximum it can pay an outside vendor without increasing total costs? Note: Do not round intermediate calculations.
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