# monthly costs vs Direct costs

• Jul 1st 2011, 01:30 PM
bigwave
monthly costs vs Direct costs
Suppose the development dept of a firm charges 10% of its total monthly costs to the promotional dept, and the promotional dept charges 5% of its total monthly costs to the development dept.
If the direct costs of the development dept. are \$19895 and the direct costs of the promotional dept are \$10000, find the total costs for each dept.
Ans. Devel. = \$20,497, promo. = \$12,049

I am just beginning to study business math but on this question didn't know how to use the direct costs to effect the total costs.

.10(19895) + 10000 i thot would be the total costs of the promo dept but its not.
so need help knowing how to set this up (Cool)
• Jul 1st 2011, 01:48 PM
SpringFan25
Re: monthly costs vs Direct costs
define:
d = total total costs of development dept
p = total costs of the promotional dept

The total costs for each department are:
the direct costs for that department
plus some percentage of the other departments total costs

So you can write:
d= 19895 + 0.05p
p= 10000 + 0.1d

This is a set of simultaneous equations, solve for d and p. This gives the answers you supplied