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Day care in the workplace "It's close to a $40,000 loser and we ought to...

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Accounting

Day care in the workplace

"It's close to a $40,000 loser and we ought to devote our efforts elsewhere," noted Karenne Whitmore, after reviewing financial reports of her company's attempt to offer a reduced-price daycare service to employees. The daycare's financial figures for the year just ended follow.

Revenues = $ 120,000

Variable Costs = $ 45,000

Traceable Fixed Costs = $ 89,000

Allocated Corporate Overhead = $ 24,000

If the daycare service/center is closed, 70% of the traceable fixed cost will be avoided. In addition, the company will incur one-time closure costs of $6,800.

1)

-Show calculations that support Whitmore's belief that the daycare center lost almost $40,000.

-Should the center be closed? Show calculations to support your answer

-What problem might the company experience if the center is closed?

-Give your recommendation. What are some alternatives to providing the day care in the work place? What are some qualitative factors to consider in this decision?

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