FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Setting prices for an Internal Service Fund
Arlington Town uses an Internal Service Fund to account for its motor pool activities. You have the following information:
Automobiles: The Motor Pool uses two 6-passenger vans, each costing $67,500
and each estimated to have a 5-year life when they were acquired in 2020.
Driver salaries: The Motor Pool has a driver-administrator, who earns $67,500
a year, and a driver, who earns $52,500.
The town uses a rate of 27 percent (to cover benefits, including pensions)
for planning purposes.
Insurance: In 2020, the town purchased a 3-year automobile accident policy
at a cost of $9,000.
Fuel and maintenance costs: Based on experience, the driver-administrator
estimates that total fuel and maintenance costs for the year will be $12,000.
Billing units: To simplify its record keeping, the Motor Pool charges a fixed price
per trip. Arlington’s budget office estimates it will provide 1,200 trips to the
town’s departments in 2021.
Based on the information given, what is the price per trip that the Motor Pool Internal Service Fund needs to charge users during calendar year 2021 to break even?
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