AHMAD AND AMINAH: CASE Ahmad and Aminah are a married couple. They both worked for a railroad company for 30 years. At age 57, Ahmad and age 52, Aminah retired and moved to Kangar, a small town in the northern part of Malaysia, which has a population of approximately 3,500 residents. When the they moved to the town, they decided to start a child care business in their home called Nanna's House. Nanna's House is licensed by the state. The state charges an annual fee of RM 225 to maintain the license. Insurance is required at a cost of RM3,840 annually. The facility is licensed to care for a maximum of six children. The Nanna's charge a fee of RM1800 per month for each child. The monthly fee is based on a full day of care, from 8:00 a.m. to 4:00p.m. If additional time is required beyond 4:00 p.m., parents must pay an additional charge of RM15 per hour for each child. The couple provides two meals and a snack for the children. The cost of the meals and snack is RM3.20 per child per day. There are six children currently enrolled. The facility is very nice. It is an 820 square foot addition to their home that was built in 1984. Ahmad and Aminah purchased the home and completed the renovations for RM79,500 and they believe the addition has a useful life of 25 years. The facility has a large open space for play, reading, and other activities. There is a section for sleeping which contains small cots. The facility is equipped with a small kitchen, two bathrooms and a small laundry area. The day care increased the Nanna's utility cost by RM50 each month. During the first week of operations, the washer and dryer stopped working. Both appliances were old and had been used by the couple for many years. The old appliances cost a total of RM440. While a laundry room was not initially a necessity, it became increasingly important for laundering the soiled clothes of the children, blankets, and sheets. A company nearby, Red Oak Laundry and Dry Cleaning, can launder clothing for the Nanna's House, including pick-up and delivery, for RM52 per month. Alternatively, the Nanna's House can take clothes to the Laundromat once a week, which is three miles away (one way). The applicable mileage rate is RM0.56/mile. They can launder the clothes themselves at a cost of RM8 per week. The self-service alternative does not include detergent or fabric sheets. The couple would need to purchase these items in order to use the Laundromat. Purchasing laundry supplies in bulk from Mega Mart would cost RM35 every quarter. The final alternative is for the Nanna's House to purchase a washer and dryer. The cost of the appliances is: washer RM420 and dryer RM380. The additional accessories for both appliances, needed for installation, cost RM43.72. The store will deliver the appliances at a total cost of RM35. The cost of installing the appliances is free. Both appliances are expected to last 8 years. According to the manufacturer the washer will increase energy costs by RM120 per year. The dryer will increase energy costs by RM145 per year. Ahmad and Aminah need some assistance in decision making and evaluation. They have contacted you to provide some advice. Requirements Consider the different types of costs discussed in this course. List the costs discussed in the case and provide one specific example of each. EXAMPLE Fixed cost Annual license fee of RM225. The license fee does not change regardless of the couple's activities. Note: You cannot use this specific example of a fixed cost. There are however other fixed costs that you may use
