Flox Hill Consulting has its own printing department with the following annual costs: Supplies $400,000
Labor 300,000
Overhead 200,000
Total $900,000
The managers would like to outsource the printing function because it is not considered a core competency. The overhead is 60% fixed. Of the fixed overhead, $60,000 is the salary of the printing department director. The remaining overhead is an allocation of overhead costs for the entire consulting firm. The department director would still oversee the printing activities and coordinate all of the printing activities for the organization with the outside printing vendor. The maximum amount that Flox Hill is willing to pay an outside firm to replace the printing services is:
A)$820,000
B)$900,000
C)$700,000
D)$840,000

Question

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The Answer of Flox Hill Consulting has its own printing department with the following annual costs: Supplies $400,000
Labor 300,000
Overhead 200,000
Total $900,000
The managers would like to outsource the printing function because it is not considered a core competency. The overhead is 60% fixed. Of the fixed overhead, $60,000 is the salary of the printing department director. The remaining overhead is an allocation of overhead costs for the entire consulting firm. The department director would still oversee the printing activities and coordinate all of the printing activities for the organization with the outside printing vendor. The maximum amount that Flox Hill is willing to pay an outside firm to replace the printing services is:
A)$820,000
B)$900,000
C)$700,000
D)$840,000

Flox Hill Consulting Has Its Own Printing Department with the Following