University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Printing Developing 3,000 2,000 $10,000 Maintenance Personnel Machine-hours 1,000 1,000 Labor-hours 500 500 Department direct costs $ 5,000 $12,000 $15,000 University Printers estimates that the variable costs in the Personnel Department total $7,000 and in the Maintenance Department variable costs total $3,000. Avoidable fixed costs in the Personnel Department are $4,000. Required: If University Printers outsources the Personnel Department functions, what is the maximum it can pay an outside vendor without increasing total costs? (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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jen

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and
Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and
personnel costs on the basis of labor-hours worked by the employees in each.
The following data appear in the company records for the current period:
Maintenance
Personnel
Printing
1,000
Developing
3,000
2,000
$10,000
Machine-hours
1,000
Labor-hours
500
500
Department direct costs
$ 5,000
$12,000
$15,000
University Printers estimates that the variable costs in the Personnel Department total $7,000 and in the Maintenance Department
variable costs total $3,000. Avoidable fixed costs in the Personnel Department are $4,000.
Required:
If University Printers outsources the Personnel Department functions, what is the maximum it can pay an outside vendor without
increasing total costs? (Do not round intermediate calculations.)
Transcribed Image Text:University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Personnel Printing 1,000 Developing 3,000 2,000 $10,000 Machine-hours 1,000 Labor-hours 500 500 Department direct costs $ 5,000 $12,000 $15,000 University Printers estimates that the variable costs in the Personnel Department total $7,000 and in the Maintenance Department variable costs total $3,000. Avoidable fixed costs in the Personnel Department are $4,000. Required: If University Printers outsources the Personnel Department functions, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)
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