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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 25 Employees Transactions Department direct costs 50,000 $69,000 Domestic 15 10,000 $ 158,750 International 60 40,000 $604,000 $21,500 BluStar estimates that the cost structure in its operations is as follows. Variable costs Fixed costs Total costs Avoidable fixed costs Administration $ 24,000 45,000 $ 69,000 $ 11,750 Accounting $ 5,500 16,000 $21,500 $ 4,200 Domestic $ 115,000 43,750 $ 158,750 $ 19,500 International $429,000 175,000 $604,000 $113,000 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C 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 Complete this question by entering your answers in the tabs below. Required A Required B Required C If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.) Maximum amount Complete this question by entering your answers in the tabs below. Required A Required B Required 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? Maximum amount
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