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Exercise 11-39 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4,5) Caro Manufacturing has two...

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Exercise 11-39 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4,5) 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 by Direct Maintenance Cafeteria Machining Assembly Department Machining Assembly Maintenance Cafeteria $140,000 65,000 45,000 35,000 0.2 - 0.5 0.1 0.3 0.1 Caro estimates that the variable costs in the Maintenance Department total $14,000, and in the Cafeteria variable costs total $18,000. Avoidable fixed costs in the Maintenance Department are $7,000. 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.) Maximum Amount

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