Question 3: Cost Analysis (2pts)

1) In the Heartland County Road Department case, if we use the service output level (i.e. miles of road repaired) as cost allocation basis to allocate the indirect costs, what would be unit costs for each mission center? And how large the deficit would be for each mission center? Please use the following Excel Template to conduct the cost analysis (in the "Cost Anlaysis" sheet).

2) Suppose a contractor offers to maintain the paved road at the price of $5,700 per mile, should the Heartland Road Department contract out its paved road maintenance service or not? Why? Assume the equipment lease cannot be discontinued.