Problem 11-66 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4, 5)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.Using DepartmentSupplyingDepartmentProcessingAdministrationMaintenanceDirect costProcessing Administration0010%$86,000Variable costsFixed costsTotal costsAvoidable fixed costsC.50%020%a. Processing Departmentb. Administration DepartmentMaintenance Department$590,000Maintenance000$256,000MaximumAmountBranches10%60%20%$4,400,000The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows.Processing Administration Maintenance Branches$133,000$1,800,000$60,00026,000$153,000437,000123,0002,600,000$86,000$256,000$4,400,000$590,000$276,000$ 8,000$ 84,000 $ 670,000 $ 630,000Electronic40%40%50%$2,350,000Required: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 totalcosts?c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs?Electronic$1,250,0001,100,000$2,350,000

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

Required: 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? a. Processing Department b. Administration Department C. Maintenance Department Maximum Amount

Required: 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? a. Processing Department b. Administration Department C. Maintenance Department Maximum Amount

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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