Assume that you are the Budget Director for the City of Hometown. You have been provided with the following information about the City of Hometown’s ambulance service:
The City of Hometown currently uses tax revenues to finance the provision of ambulance services to city residents.
Currently, ambulance services are provided utilizing city staff.
The direct cost of providing ambulance services is $300,000 per year.
Approximately 2,000 people utilize the ambulance services per year (assume one trip per user).
The city has an indirect cost rate equal to $.40.
If the city decided to charge residents who utilize city ambulance services, how high would the charge need to be per trip in order to recover the full cost of providing the ambulance services? (Please show calculations on arrival to answer)