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Question - A non-profit long-term care cooperative operates vans to transport mobility-impaired citizens. It experienced these costs last month:
Type of cost
Number of units
Cost/unit
Measurement
Principal and interest per van
3
$1,200
Monthly
Payment per manager
1
$4,000
Payment per dispatcher
2
$3,000
Drivers
4
$3,500
Diesel
$3
Trip
Medical supplies
Maintain van and equipment
$5
For this problem, each type of cost is either fixed or variable. We are obliged to pay principal and interest on the vans for the next five years. Our manager, dispatchers, and drivers have binding three-year contracts.
In recent years, we have been making a very steady 1,200 van trips per month.
a) What is the total fixed cost this month? Please take into account the number of units for costs that are fixed, along with the cost per unit.
b) What is the expected fixed cost per trip this month?
c) What is the variable cost per trip?
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