"It's Close to a $40,000 Loser and We Ought to Devote

question 58

Essay

"It's close to a $40,000 loser and we ought to devote our efforts elsewhere," noted Cindy Mires, 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.

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.
Required:
A. Show calculations that support Mires' belief that the daycare center lost almost $40,000.
B. Should the center be closed? Show calculations to support your answer.
C. What problem might the company experience if the center is closed?

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Definitions:

Rorschach

A psychological test in which subjects' perceptions of inkblots are recorded and then analyzed using psychological interpretation, complex algorithms, or both.

MMPI

The Minnesota Multiphasic Personality Inventory, a comprehensive psychological test used to assess personality traits and psychopathology.

16PF

The 16 Personality Factors (16PF) questionnaire is a self-report assessment tool developed by Raymond Cattell to measure the primary traits of human personality in psychological and vocational settings.

Psychic Determinism

The theory that all mental processes are not spontaneous but are determined by the unconscious or pre-existing mental complexes.