Mike Andrews is planning a professional development training trip to Metro on an upcoming Saturday. The round trip is 300 kilometres. The buses transporting the teachers will leave the schools at 8:00 a.m. and return by 6 p.m. The actual driving time is two hours each way (four hours round trip).

Bid from Acme Bus Company:

$645 per bus ($1.55 per km. plus $180 per day for the driver ($18 per hour for 10 hours))

Transfer price from Administration Department:

$1,290 per bus (300 km at $4.30/km.) Wanda calculated the $4.30/km rate based on the following budgetary data:

Garage (Note 1) Fuel (Note 2) Tires (Note 3) Annual insurance Drivers (Note 4) Bus lease (Note 5) Total

Annual kilometres in service Cost per kilometre Notes:

$

166,000 216,000 55,000 96,750 270,000 540,000 $ 1,343,750 312,500

$4.30

1. The base facility costs $40,000 per year plus, $14 per bus per day of usage of the bus to cover minor repairs, cleanup and a visual safety inspection (i.e., 200 school days x 45 buses x $14 = $126,000).

2. Buses use an average of $8 of fuel per operating hour (3 hours per day x 45 buses x 200 days x $8 = $216,000).

3. Pursuant to government regulations, bus tires are changed annually.

4. Drivers are paid $10 per hour for regular driving time (double for weekends) and $10 per hour (any day) for waiting (200 days x 45 drivers x 3 hours x $10 = $270,000.)

5. Buses are leased at $12,000 each per year. This amount covers major maintenance.