Required: If Woodstock Binding outsources the IT Department functions, what is the maximum it can pay an outside vendor without increasing total costs? Note: Do not round intermediate calculations. Maximum amount
Required: If Woodstock Binding outsources the IT Department functions, what is the maximum it can pay an outside vendor without increasing total costs? Note: Do not round intermediate calculations. Maximum amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: \table[[,IT,HR,Publishing,Binding],[,0,1,550,2,480,2,170],[IT tickets,16,0,24,40],[\table[[Employees],[Department direct costs]],$154,000,$248,400,$432,000,$395,000
Transcribed Image Text:Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating
departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT
request) in each department and HR costs on the basis of employees in each department.
The following data appear in the company records for the current period:
IT tickets
Employees
Department direct costs.
IT
HR
1,550
Publishing
2,480
Binding
2,170
16
0
24
40
$ 154,000
$ 248,400
$ 432,000
$395,000
es
Woodstock Binding estimates that the variable costs in the IT Department total $115,000, and in the HR Department variable costs total
$145,000. Avoidable fixed costs in the IT Department are $18,500.
Required:
If Woodstock Binding outsources the IT Department functions, what is the maximum it can pay an outside vendor without increasing
total costs?
Note: Do not round intermediate calculations.
Maximum amount
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