Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A county's recycling program collected 46,280 tons of recyclable refuse this year. The cost of the program includes five vehicles that can partly process the

A county's recycling program collected 46,280 tons of recyclable refuse this year. The cost of the program includes five vehicles that can partly process the recyclables. The county does not have the depreciation information for these trucks; but they estimate annual maintenance costs of up to $10,000 for each truck. The fuel expense totaled $69,000 this year. The county also hires fifty workers in the program. The annual personnel expense this year was $1.5 million. Other expenses this year included office expenses of $15,000, overhead of $189,000, and miscellaneous expenses of $150,000.

Recently, a small nearby city asked the county to provide recycling services. The city offered a fixed fee of $6.00 for every ton of recyclable material pickup. It is estimated that there will be 3,500 tons of pickup during the next year from the city. County analysts studied the proposal. They reckoned that, to add 3,500 tons of pickup, the county did not need new vehicles or new hiring. Office and miscellaneous expenses would also remain the same, but the fuel consumption and the overhead would increase.

Suppose that the city wants a two-year deal. In the second year of the deal, the recycling materials from the city will be 5,000 tons. The county analysis that a new vehicle is needed for the increase. The annual depreciation of the vehicle is $30,000, and the annual maintenance cost is the same, $10,000.

Treating the fuel and the overhead as variable costs and others as fixed costs, calculate the incremental cost and the marginal cost for the county. 


If the city still wants to pay the same rate for the service, $6.00 per ton, should the county accept the offer?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To calculate the incremental cost and marginal cost for the county we need to identify the fixed and ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics

Authors: Mark Hirschey

12th edition

9780324584844, 324588860, 324584849, 978-0324588866

More Books

Students also viewed these Finance questions

Question

Discuss the consequences of ethical misconduct.

Answered: 1 week ago

Question

What is really the cause of the conflict?

Answered: 1 week ago