Question

In: Accounting

The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to...

The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection.

Cost data for the most recent year of operations for Evergreen are as follows.
  

Administrative cost $ 414,000
Operating costs—trucks 1,350,000
Other collection costs 334,000

Data on customers for the most recent year are as follows.

Households Businesses
Number of customers 13,400 5,800
Waste collected (tons) 5,400 14,800

The City Council of Imperial Falls is considering allowing other private waste haulers to collect waste from businesses, but not from households. Service to businesses from other waste collection firms would not be subject to price regulation. Based on information from neighboring cities, the price that other private waste collection firms will charge is estimated to be $0.04 per pound (= $80 per ton). (1 ton = 2,000 pounds)

  

Evergreen's CEO has approached the city council with a proposal to change the way costs are allocated to households and businesses, which will result in different rates for households and businesses. She proposes that administrative costs and truck operating costs be allocated based on the number of customers and the other collection costs be allocated based on pounds collected. The total costs allocated to households would then be divided by the estimated number of pounds collected from households to determine the cost of collection. The rate would then be 20 percent above the cost. The rate for businesses would be determined using the same calculation.

Required:

a. Based on cost data from the most recent year, what is the price per pound charged by Evergreen for waste collection under the current system (the same rate for both types of customers)?

b. Based on cost and waste data from the most recent year, what would be the price per pound charged to households and to businesses by Evergreen for waste collection if the CEO’s proposal were accepted?

Solutions

Expert Solution


Related Solutions

The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to...
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 25 percent above the average total cost of collection. Cost data for the most recent year of operations for Evergreen are as follows....
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to...
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection. Cost data for the most recent year of operations for Evergreen are as follows....
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to...
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection. Cost data for the most recent year of operations for Evergreen are as follows:...
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to...
The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection. Cost data for the most recent year of operations for Evergreen are as follows....
Problem 2-71 (Algo) Cost Allocation and Regulated Prices (LO 2-3) The City of Imperial Falls contracts...
Problem 2-71 (Algo) Cost Allocation and Regulated Prices (LO 2-3) The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection firms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection. Cost data for the...
A city is evaluating the benefits to be achieved by changing the level of waste collection...
A city is evaluating the benefits to be achieved by changing the level of waste collection service. The change would result in (i) reduced service to the customer, (ii) an increase in the number of houses served daily by each crew, and (iii) a cost savings that would put off a 10% collection rate increase for 1 year. The existing rate for collection service (two containers per house) is $12.5/month. List the important variables for (i), (ii), (iii) separately that...
A city starts a solid waste landfill that it expects to fill to capacity gradually over...
A city starts a solid waste landfill that it expects to fill to capacity gradually over a 21-year period. At the end of the first year, it is 13 percent filled. At the end of the second year, it is 29 percent filled. Currently, the cost of closure and postclosure is estimated at $1 million. None of this amount will be paid until the landfill has reached its capacity. Which of the following is true for the Year 2 government-wide...
A city starts a solid waste landfill that it expects to fill to capacity gradually over...
A city starts a solid waste landfill that it expects to fill to capacity gradually over a 21-year period. At the end of the first year, it is 13 percent filled. At the end of the second year, it is 29 percent filled. Currently, the cost of closure and postclosure is estimated at $1 million. None of this amount will be paid until the landfill has reached its capacity. If this landfill is judged to be a proprietary fund, what...
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects...
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.50 million plus an additional $810,000 for postclosure work. Of these totals, the city must pay $58,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 2 percent of capacity....
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects...
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.50 million plus an additional $810,000 for postclosure work. Of these totals, the city must pay $58,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 2 percent of capacity....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT