Within a company there is a (micro)economy that is monitored by the accounting p

Question

Within a company there is a (micro)economy that is monitored by the accounting procedures. In terms of the accounts, the various departments "produce" costs, some of which are internal and some of which are direct costs. This problem shows how an open Leontief model can be used to determine departmental costs.

The sales department of an auto dealership charges 10% of its total monthly costs to the service department, and the service department charges 20% of its total monthly costs to the sales department. During a given month, the direct costs are $68,600 for sales and $49,000 for service. Find the total costs of each department. (Round your answers to the nearest whole number.)

sales department     $
service department     $

Explanation / Answer

sales department: $68000+(49000/10) =$73500

service department: $ 49000+(68000/20)=$63700

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