Author Question: One way to report revenue earned by a company is to present it by the different segments of ... (Read 60 times)

neverstopbelieb · **on:** Jul 5, 2018

One way to report revenue earned by a company is to present it by the different segments of business.
a. True
b. False

Indicate whether the statement is true or false

Question 2

(Development of billing rate for an Internal Service Fund)

The City of Casa Cortez uses an Internal Service Fund (ISF) to provide centralized printing services for all City agencies.

City agencies are billed on a per-page basis (number of pages in a document times the number of documents printed). The City requires the ISF to develop its billing rate so as to recover all costs on the accrual basis of accounting, plus the cost of repaying a start-up loan made by the City to the ISF. Compute the rate per page to be charged by the ISF, based on the following factors:
a. Start-up loan from City to ISF - 400,000 non-interest bearing loan, to be repaid in equal payments over 10 years
b. Printing equipment - estimated to cost 300,000 and to have an average life of 10 years
c. Personnel costs - Estimated salaries of 500,000, plus contribution to Pension Trust Fund of 10 of salaries
d. Paper- Opening inventory of 16,000; expected purchases of 72,000; expected ending inventory of 12,000
e. Occupancy costs - Estimated at 50,000 per year
f. Expected number of pages to be printed - 20 million

Chelseyj.hasty · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

True

Answer to Question 2

Billing components:
a. Repayment of loan (400,000 / 10) 40,000
b. Depreciation (300,000 / 10) 30,000
c. Personnel costs (500,000 + 10 of 500,000) 550,000
d. Paper (16,000 + 72,000 - 12,000) 76,000
e. Occupancy costs 50,000
Total costs 746,000

f. Estimated number of pages to be printed 20,000,000

Billing rate (746,000 / 20,000,000) 3.73 cents/page