The City of Eagle Rock uses an Internal Service Fund to provided printing services to its various departments. It bills departments on the basis of an estimated rate per page of printed material, computed on the accrual basis of accounting. From the following information, compute the total cost that will be used to develop the cost per page. Assume that the equipment in the item 6 was contributed by the city and that the pricing objective was to recoup the cost of equipment in the rate charged over the life of the equipment.
1. Inventory of paper on hand at beginning of year: $10, 000.
2. Estimated paper purchase during the year: $60,000.
3. Estimated amount of paper to be consumed during the year: $55,000.
4. Estimated salaries to be paid during the year: $255,000.
5. Estimated salaried earned during the year, including both what was paid and what was owed at year end: 265,000.
6. Cost of equipment on hand at beginning of the year (estimated life was 10 years):$1,000,000