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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: Using Department Supplying Processing nt Processing Administration Administration 50% Electronic 40% Branches 0 10% 60% 40% 50% $2,200,000 0 0 0 10% $93,000 20% $580,000 20% $4,400,000 Maintenance Direct cost 0 $287,000 The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows: Processing $56,000 37,000 $93,000 Electronic $1,150,000 1,050,000 Administration Maintenance Branches $1,750,000 2,650,000 $4,400,000 $157,000 423,000 $580,000 $130,000 157,000 $287,000 Variable costs Fixed costs $2.200,000 Total costs $10,000 $275,000 $ 78,000 $ 660.000 700,000 Avoidable fixed costs Required: GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs? a. Maximum amount b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? Maximum amount c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? Maximum amount
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