Exercise $11-37($Static$)$ Reciprocal Cost Allocation$-$Outsourcing a Service Department $($LO $11-1,2)$

Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair

and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for

the month of March follow:

Mack Precision Tool and Die estimates that the variable costs in the Repair Department total $$15,225,$ and in Quality Control

variable costs total $$39,200.$ Avoidable fixed costs in the Repair Department are $$12,400.$

Required:

If Mack Precision Tool and Die outsources the Repair Department, what is the maximum it can pay an outside vendor without

increasing total costs?

Note: Do not round intermediate calculations.

Answer is complete but not entirely correct.