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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,
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 Domestic International Employees 25 15 60 50,000 10,000 40,000 Transactions $62,000 Department direct costs $27,000 $154,500 $592,000 Blustar estimates that the cost structure in its operations is as follows: Administration Accounting Domestic International Variable costs 26,000 5,000 $111,000 $437,000 36.000 22,000 43.500 155,000 Fixed costs 62,000 $27,000 $154,500 $592,000 Total costs 10.250 Avoidable fixed costs 5,000 18,000 $110,000 Required a. If Blustar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.) Maximum amount
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