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Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs

Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:

Supplying Department Using Department
Processing Administration Maintenance Branches Electronic
Processing 0 50 % 0 10 % 40 %
Administration 0 0 0 60 % 40 %
Maintenance 10 % 20 % 0 20 % 50 %
Direct cost $ 93,000 $ 560,000 $ 281,000 $ 4,250,000 $ 2,450,000

The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows:

Processing Administration Maintenance Branches Electronic
Variable costs $ 63,000 $ 157,000 $ 130,000 $ 1,800,000 $ 1,250,000
Fixed costs 30,000 403,000 151,000 2,450,000 1,200,000
Total costs $ 93,000 $ 560,000 $ 281,000 $ 4,250,000 $ 2,450,000
Avoidable fixed costs $ 9,000 $ 283,000 $ 77,000 $ 690,000 $ 600,000

a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs?

b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs?

c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs?

Thank you for your help!

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