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CHAPTER 8 Applying the Cost Model to Various Scenarios As noted earlier in this report, the Cost Sharing Model can be used to address a wide variety of issues: · For the purpose of improving internal program management, the model offers more precise measures of what services currently cost to deliver. · For agencies interested in changing their service delivery methods (e.g., purchasing services instead of providing them) it can demonstrate which method is most attractive on a cost per unit of service. · For transportation providers who sell their services to other agencies, the model can be used to help decide what prices to charge for the services they provide. This chapter examines each of these situations. What's the Cost of the Current Services? The Burke Lake Transportation System (BLTS) provides trips for the members of their com- munity. During the last fiscal year · BLTS provided 405,000 miles of service. · BLTS had 35,325 operating hours. · BLTS's expenses were $612,917. · The system provided 63,375 trips. This means that the system-wide averages (total costs divided by each unit of service) were the following: · $17.35 total cost per hour ($612,917 divided by 35,325) · $1.51 total cost per mile ($612,917 divided by 405,000) · $9.67 total cost per trip ($612,917 divided by 63,375) Should We Continue to Provide Services? The Area Agency on Aging (AAA) wants to consider purchasing trips from BLTS instead of pro- viding those trips themselves. The AAA has been providing 25,000 trips per year at an annual cost of $310,000. Their average cost per trip is $12.40; it would make sense for them to purchase trips from BLTS at the lower cost of $9.67 per trip because the AAA could realize a savings of $2.73 per trip, which would amount to $68,250 on an annual basis. Those savings could be used to purchase additional trips for existing riders or to add new riders. 29