Case Study Analysis Frank and Ellen Morrison are a married couple. They both worked for a railroad company for 30 years. At age 57, Frank and age 52, Eillen retired and moved to the small town of Ovilla, TX, which has a population of approximately 3,500 residents. When the Morrisons moved to the town, they decided to start a child care business in their home called Harmony's House. Harmony's House is licensed by the state. The state charges an anmual foe of $225 to maintait the license. Insarance is required at a cost of $3,840 annually. The facility is licensed to care for a maximuin of six children. The Momisons charge a fee of 5800 per month for each child. The monthly fee is based on a full day of care, from 8.00a.mt, to 4:00p.m. If additional time is reguired beyond 4:00 p.m., parents must pay an additional churge of $15 per hour for each child. The couple provides two meals and a snack for the children. The cost of the meals and suack is 53.20 per child per day. There are six children currently enrolled. The facility is very nice. It is an 820 square fool addition to their bome that was built in 1964. The Mocrisoea parchased the bone and conpleted the resovations for $79,500 and they believe the adition 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 slesping which contains small cots. The facility is equipped with a small kitchen, two buthrooms and a smull lausdry ares. The daycare increased the Franks" utility cost by $50 each month. During the first weck 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 $40. While a laundry room was not initially a becessity, it became increasingly important for laundering the soiled clothes of the children, blankets, and shects, A company mearby, Red Oak Laundry and Dry Cleaning. can lauader clothing for the Morrisons, inelading pick-up and delivery, for $52 per month. Alternatively, the Morriwons can take clothes to the laandronat once a weck, which is three miles away (one way). The applicable mileuge rate is $0.56 mile. They can launder the cloches themselves at a cost of 58 per werk. The self-service ahernative does aot include detergent or fabric sheets. The couple would need to purchabe these items in ofder to ase the laundromat. Purchasing laundry supplies in bulk from MegaMart woald cost $35 every quarter. The final alternative is for the Merrisons to purchase a washer and dryer. The cost of the uppliances is: washer $420 and dryer $380. The additional aceessories for both applianess, bected for installation, cost $43.72. The store will deliver the applinees at a total cost of 535 . The cost of instailing the applianes is free. Both appliances are expected to last 8 years. According to the manutacturer the washer will increase energy costs by $120 per year. The dryer will increase cnergy costs by 5145 per yoar. The Morrisons nced some assistance in decision making and evaluation. They have contacted yoa, their accountant, to provide sone advice. Noter Stadents must answer the following qurstions reganding the case and provide swppart to their arguments with sperific examples from the case. Question 1: Consider the different types of costs discussed in this course. List the costs discussed in the case and peovide one specific example of each: (24 marks) Question 2. Based os the informanion provided, what information is relevant to the docision to purchase the applianees? What information is irrelevant to the decixion fo purchise the appliasces? Why? (16 Marks)
