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 Transactions 50,000 10,000 40,000 Department direct costs $ 52,000 $ 27,000 $ 158,000 $ 602,000 BluStar estimates that the cost structure in its operations is as follows. Administration Accounting Domestic International Variable costs $ 25,500 $ 5,000 $ 114,000 $ 430,000 Fixed costs 26,500 22,000 44,000 172,000 Total costs $ 52,000 $ 27,000 $ 158,000 $ 602,000 Avoidable fixed costs $ 11,250 $ 3,800 $ 21,000 $ 114,500 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?

8 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 num of transactions. A summary of BluStar operations follows. 4 points Employees Transactions Department direct costs Administration Accounting Domestic International 25 15 60 50,000 10,000 40,000 $52,000 $27,000 $ 158,000 $602,000 BluStar estimates that the cost structure in its operations is as follows. Variable costs Fixed costs Total costs Avoidable fixed costs Administration Accounting $ 25,500 $ 5,000 26,500 22,000 $ 52,000 $27,000 $11,250 $ 3,800 Domestic $114,000 44,000 $ 158,000 $ 21,000 International $430,000 172,000 $602,000 $114,500 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 cos c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendo without increasing total costs? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs? Maximum amount $ 36,750