Sanilac County has a lease on a lawn mower for $2500 per month and $.02 per minute of operation. Operating costs for fuel, oil, technicians, and so on are all variable at $.03 per minute. Departments had projected a need for 100,000 minutes per month. The county planning department predicted its usage at 36,000 minutes per month. The lawn mower was actually operated 42,000 minutes in 2011.
Calculate one predetermined rate per minute to allocate all lawnmower usage. How much should be allocated to the city department this month?
Now, assume that fixed and variable costs were allocated separately. How should each pool be allocated? What is the total cost to be allocated to the city department with this method?