Question

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. 409,000 1,325,000 329,000 Administrative cost Operating costs-trucks Other collection costs Data on customers for the most recent year are as follows. Households Businesses Number of customers 12,900 4,900 4,800 13,800 Waste collected (tons) 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 $0.05 per pound (= $100 per ton). (1 ton = 2,000 pounds)

Answer 1

a.Determination of price per pound under current system
Administrative cost	409,000
Operating costs	1,325,000
Other collection costs	329,000
Total costs	2,063,000
Pounds of waste collected	37,400,000
Cost per pound	0.0552
Mark up	0.0138
Price charged per pound	0.0690
	Households	Businesses
Administrative cost	298,084.75	110,915.25
Operating costs	965,677.97	359,322.03
Other collection costs	86,208.56	242,791.44
Total costs	1,349,971.27	713,028.73
Pounds of waste collected	9800000	27600000
Cost per pound	0.1378	0.0258
Mark up	0.0344	0.0065
Price charged per pound	0.1722	0.0323

409000 1325000 329000 =SUM(B2:B4) = (4900+13800)*2000 =B5/B6 =B7*25% =B7+B8 1 a.Determination of price per pound under current system 2 Administrative cost 3 Operating costs 4. Other collection costs 5 Total costs 6 Pounds of waste collected 7 Cost per pound 8 Mark up 9 Price charged per pound 10 11 12 Administrative cost 13 Operating costs 14 Other collection costs 15 Total costs 16 Pounds of waste collected 17 Cost per pound 18 Mark up 19 Price charged per pound Households Businesses =B2*12900/(12900+4800) =B2*4800/(12900+4800) |=B3*12900/(12900+4800) =B3*4800/(12900+4800) =B4*4900/(4900+13800) =B4*13800/(4900+13800) =SUM(B12:B14) =SUM(C12:C14) =4900*2000 =13800*2000 =B15/B16 C15/C16 =B17*25% =C17*25% =B17+B18 =C17+C18