A month has passed since the council debated the overhead costs of refuse collec

Question

A month has passed since the council debated the overhead costs of refuse collection. Bob Jansen has had enough time to do some calculations for himself. As far as the ‘products’ collected are concerned, he distinguishes two cost centres (which are products), namely:

tonnes of refuse collected and processed for private persons;

tonnes of refuse collected and processed for businesses.

          In addition, he distinguishes three so-called cost pools. The first two relate to the overheads of the municipal organization as a whole, to which he referred in his letter of November 5, 2012, and the third cost pool relates to the overheads of his own department:

central administrative department (personnel, finance and information); annual budget of €1.6 million;

central coordination (political management and central management of the municipality); annual budget of €1.1 million;

management of the refuse collection department and planning its activities; annual budget of €0.3 million.

            At present each department is allocated costs from the first two cost pools that are proportionate to the number of employeesin the department in question (expressed as a full-time equivalent (fte)). The total number of employees of the municipality to which the costs from the first two cost pools are allocated amounts to 550 ftes; the number of employees in the refuse collection department is 99 ftes. Each of the two cost units is allocated costs from the third cost pool that are proportionate to the work done for the cost unit in question, i.e. about 70% of the work is done for private persons and about 30% for businesses. Table 2 contains the number of tonnes and the direct costs for each type of waste for the year 2001.

            Bob Jansen starts his calculations by determining full unit costs per tonne of waste, for private persons and for businesses. To that end, as is customary in his municipality, he decides to allocate the central overheads (i.e. overheads from the first two cost pools) to the two cost centres proportionate to the tonnes of waste collected for private persons and the tonnes of waste collected for businesses respectively.

Table 2. Number of tonnes and direct costs per type of waste (2001)

Type of waste

Number of tonnes

Direct costs

Private persons

21,000

€2.6 million

Businesses

14,000

€0.9 million

Part II (20 points)

Please calculate the full unit cost per tonne of waste from private persons and that per tonne of waste from businesses, using the data mentioned above.

Type of waste

Number of tonnes

Direct costs

Private persons

21,000

€2.6 million

Businesses

14,000

€0.9 million

Explanation / Answer

A month has passed since the council debated the overhead costs of refuse collec

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