making these Buiso decisions? Spend time here discussing some of the issues related to internal service funds. A city accounts for a vehicle repair service in an internal service fund and bills departments at "full cost." The department's fixed costs are $80,000 per month; its variable costs are $40 per hour. On average it provides 4,000 hours of service per month. Fixed costs: $ 80,000 • Variable costs: 160,000 (4,000 x $40) • Total cost: 240,000 • No. of hours: 4,000 • Cost per hour: 60 The police department determines that it is economically justifiable to repair a car if it can be fixed for $3,000 or less. The repair service estimates that the job will take 60 hours.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Using the information in the scenario presented below, what problems can you see with making these
decisions? Spend time here discussing some of the issues related to internal service funds.
A city accounts for a vehicle repair service in an internal service fund and bills departments at "full
cost." The department's fixed costs are $80,000 per month; its variable costs are $40 per hour. On
average it provides 4,000 hours of service per month.
Fixed costs:
$ 80,000
• Variable costs:
160,000 (4,000 x $40)
Total cost:
240,000
No. of hours:
4,000
• Cost per hour:
60
The police department determines that it is economically justifiable to repair a car if it can be fixed for
$3,000 or less. The repair service estimates that the job will take 60 hours.
Transcribed Image Text:Using the information in the scenario presented below, what problems can you see with making these decisions? Spend time here discussing some of the issues related to internal service funds. A city accounts for a vehicle repair service in an internal service fund and bills departments at "full cost." The department's fixed costs are $80,000 per month; its variable costs are $40 per hour. On average it provides 4,000 hours of service per month. Fixed costs: $ 80,000 • Variable costs: 160,000 (4,000 x $40) Total cost: 240,000 No. of hours: 4,000 • Cost per hour: 60 The police department determines that it is economically justifiable to repair a car if it can be fixed for $3,000 or less. The repair service estimates that the job will take 60 hours.
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