Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used by Maintenance Cafeteria Machining Assembly Department Machining Assembly Maintenance Cafeteria Direct Costs $110,000 65,000 40,000 32,500 0.2 0.5 0.1 0.3 0.1 0.8 Caro estimates that the variable costs in the Maintenance Department total $13,000, and in the Cafeteria variable costs total $16,000. Avoidable fixed costs in the Maintenance Department are $5,000. Required: If Caro outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.) Maximum Amount
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started