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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 Department Machining Assembly Maintenance Cafeteria Direct Costs Maintenance Cafeteria Machining Assembly 5140,000 85,000 40.000 32,500 0.2 0.5 0.3 0.8 Caro estimates that the variable costs in the Maintenance Department total S10,000, and in the Cafeteria variable costs total $17,000. Avoidable fixed costs in the Maintenance Department are S9,000 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.) aximum
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