1. 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	HR	Publishing	Binding
IT tickets	0	1,400	1,400	4,200
Employees	20	0	28	44
Department direct costs	$ 154,000	$ 247,500	$ 430,000	$ 390,000

Required:

Use the direct method to allocate these service department costs to the operating departments.

Service Department Costs

IT Allocation

HR Allocation

Total costs allocated

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	Direct Costs	Proportion of Services Used by
		Repair	Quality Control	Fabricating	Finishing
Fabricating	$ 132,600
Finishing	94,200
Repair	40,200	0	0.3	0.5	0.2
Quality Control	75,000	0.3	0	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?