Business, 07.06.2021 02:40 queendolly

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period:

Maintenance Personnel Printing Developing
Machine-hours — 1,000 1,000 3,000
Labor-hours 500 — 500 2,000
Department direct costs $ 13,000 $ 37,000 $ 46,300 $ 30,000

University Printers estimates that the variable costs in the Personnel Department total $16,000 and in the Maintenance Department variable costs total $9,400. Avoidable fixed costs in the Personnel Department are $6,000.

Required:

If University Printers outsources the Personnel Department functions, what is the maximum it can pay an outside vendor without increasing total costs

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