Flox Hill Consulting Has Its Own Printing Department with the Following

Multiple Choice

Flox Hill Consulting has its own printing department with the following annual costs: $\begin{array}{lr}\text { Supplies } & \$ 400,000 \\\text { Labor } & 300,000 \\\text { Overhead } & 200,000 \\\quad \text { Total } & \$ 1900,000\end{array}$ 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) $780,000