8 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: eBook Supplying Department Processing Administration Maintenance Direct cost Processing 0 0 0 108 $80,000 Using Department Administration Maintenance Branches 50% 0 102 0 0 60% 208 0 20% $ 500,000 $220,000 $4,000,000 Electronic 408 408 508 $1,500,000 References The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows: Variable costs Pixed costs Total costs Avoidable fixed costs Processing Administration Maintenance $ 60,000 $160,000 $ 120,000 20,000 340,000 100,000 $80,000 $500,000 $ 220,000 $ 6,000 $ 270,000 $ 80,000 Branches Electronic $1,600,000 $1,200,000 2,400,000 1,050,000 $4,000,000 $2,250,000 $1,400,000 S $ 600,000 Required: a. If GECU outsources both the Processing Department and the Administration Department, the total savings (before considering the fee paid to the outside vendor) will be: More than the sum of the savings from outsourcing the Processing Department and Administration Department. O Less than the sum of the savings from outsourcing the Processing Department and Administration Department. Equal to the sum of the savings from outsourcing the Processing Department and Administration Department. Less than or equal to the savings from outsourcing the Processing Department and Administration Department O Cannot determine from the information provided. o b. In general (not limited to GECU), if a firm is considering eliminating more than one service department, the savings will be: More than the sum of the savings calculated from eliminating each of the individual service departments. Less than the sum of the savings calculated from eliminating each of the individual service departments. Equal to the sum of the savings calculated from eliminating each of the individual service departments. Less than or equal to the sum of the savings calculated from eliminating each of the individual service departments. O Cannot determine from the information provided. 8 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: eBook Supplying Department Processing Administration Maintenance Direct cost Processing 0 0 0 108 $80,000 Using Department Administration Maintenance Branches 50% 0 102 0 0 60% 208 0 20% $ 500,000 $220,000 $4,000,000 Electronic 408 408 508 $1,500,000 References The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows: Variable costs Pixed costs Total costs Avoidable fixed costs Processing Administration Maintenance $ 60,000 $160,000 $ 120,000 20,000 340,000 100,000 $80,000 $500,000 $ 220,000 $ 6,000 $ 270,000 $ 80,000 Branches Electronic $1,600,000 $1,200,000 2,400,000 1,050,000 $4,000,000 $2,250,000 $1,400,000 S $ 600,000 Required: a. If GECU outsources both the Processing Department and the Administration Department, the total savings (before considering the fee paid to the outside vendor) will be: More than the sum of the savings from outsourcing the Processing Department and Administration Department. O Less than the sum of the savings from outsourcing the Processing Department and Administration Department. Equal to the sum of the savings from outsourcing the Processing Department and Administration Department. Less than or equal to the savings from outsourcing the Processing Department and Administration Department O Cannot determine from the information provided. o b. In general (not limited to GECU), if a firm is considering eliminating more than one service department, the savings will be: More than the sum of the savings calculated from eliminating each of the individual service departments. Less than the sum of the savings calculated from eliminating each of the individual service departments. Equal to the sum of the savings calculated from eliminating each of the individual service departments. Less than or equal to the sum of the savings calculated from eliminating each of the individual service departments. O Cannot determine from the information provided