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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees,

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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting 25 Employees Transactions Department direct costs Domestic 15 10,000 $157, 250 International 60 40,000 $600,000 50,000 $63,000 $21,000 BluStar estimates that the cost structure in its operations is as follows. Variable costs Fixed costs Total costs Avoidable fixed costs Administration Accounting $ 24,500 $ 6,500 38,500 14,500 $ 63,000 $21,000 $ 10,250 $ 4,700 Domestic $114,500 42,750 $157,250 $ 21,500 International $437,000 163,000 $600,000 $112,500 Required: a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs

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