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 $ 149,600 112,200 48,300 90,300 Maximum Amount 0 Proportion of Services Used by Quality Fabricating Repair Control 0.3 0.3 0 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
$ 149,600
112,200
48,300
90,300
Maximum Amount
Proportion of Services Used by
Quality
0
0.3
Fabricating
Repair Control
0.3
0
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: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 $ 149,600 112,200 48,300 90,300 Maximum Amount Proportion of Services Used by Quality 0 0.3 Fabricating Repair Control 0.3 0 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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