Don is concerned about a professional development training trip to a nearby city that is scheduled for an upcoming Saturday. The associate superintendent solicited a bid for the trip from Acme Bus Company and it came in at half the cost of using the school division buses. Don doesn't think this makes sense and would like your advice on if there is a better way to charge for bus use between departments that benefits the company overall.

Bus service costs for upcoming training trip Buses will leave the schools at 8:00 a.m. and return by 6:00 p.m. The actual driving time is three hours each way and the total distance driven will be 300 km. Bid from Acme Bus Company: $645 per bus [$1.55/km + $180 per day for the driver ($18 per hour for 10 hours)]. Transfer price from administration department: $1,548 per bus (300 km at $5.16/km). On average, buses operate for three hours per day. The $5.16/km rate is based on the following budgetary data:

Garage (Note 1) $166,000 Fuel (Note 2) 216,000 Tires (Note 3) 55,000 Annual insurance 96,750 Drivers (Note 4) 540,000 Bus lease (Note 5) 540,000 Total $1,613,750 Annual kilometres in service 312,500 Cost per kilometre $5.16

Notes: 1. The base facility costs $40,000 per year + $14 per bus per day to cover minor repairs, cleanup, and a visual safety inspection (that is, 200 school days 45 buses $14 = $126,000). 2. Buses use an average of $8 of fuel per operating hour (3 hours per day 45 buses 200 days $8 = $216,000). 3. Pursuant to government regulations, bus tires are changed annually. 4. Drivers are paid $20 per hour for regular driving time (double for weekends) and $10 per hour (any day) for waiting. 5. Buses are leased at $12,000 each per year. This amount covers major maintenance.