Frank and Ellen Morisson are a married couple. They both worked for a textile company for $30$ years. At age $57,$ Frank and age $52,$ Ellen retired and moved to live in a small town which has a population of approximately $3,500$ residents. When the Morissons moved to the town, they decided to start a child care business in their home called Harmony$$s Home.

Harmony$$s Home is licensed by the city. The city charges an annual fee of $$225$ to maintain the license. Insurance is required at a cost of $$3,840$ annually. The facility is licensed to care for a maximum of six children. The Morissons charge a fee of $$800$ per month for each child. The monthly fee is based on a full day of care, from $8$:$00$ a$.$m$.$ to $4$:$00$ p$.$m$.$ If additional time is required beyond $4$:$00$ p$.$m$.,$ parents must pay an additional charge of $$15$ per hour for each child. The couple provides two meals and a snack for the children. The cost of the meals and snack is $$3\mathrm{.}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 $1964.$ The Morissons purchased the home and completed the renovations for $$79,500$ and they believe the addition has a useful life of $25$ years. The facility has a large open space for play, reading, and other activities. There is a section for sleeping which contains small cots$.$ The facility is equipped with a small kitchen, two bathrooms and a small laundry area. The day$-$care increased the Morisson$$ utility cost by $$50$ 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 $$440.$ While a laundry room was not initially a necessity, it became increasingly important for laundering the soiled clothes of the children, blankets, and sheets. A laundry company nearby can launder clothing for the Morissons, including pick$-$up and delivery, for $$52$ per month. Alternatively, the Morissons can take clothes to the laundromat once a week, which is three miles away $($one way$).$ The applicable mileage rate is $$0\mathrm{.}56/$mile$.$ They can launder the clothes themselves at a cost of $$8$ 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 Supermarket would cost $$35$ every quarter. The final alternative is for the Morissons to purchase a washer and dryer. The cost of the appliances is: washer $$420$ and dryer $$380.$ The additional accessories for both appliances, needed for installation, cost $$43\mathrm{.}72.$ The store will deliver the appliances at a total cost of $$35.$ The cost of installing the appliances is free. Both appliances are expected to last $8$ years. According to the manufacturer the washer will increase energy costs by $$120$ per year. The dryer will increase energy costs by $$145$ per year.

The Morisson need some assistance in decision making and evaluation. They have contacted Hanadi, their accountant, to provide some advice.

Requirements:

$1.$ Consider the different types of costs discussed in this course. List the costs discussed in the case and provide one specific example of each.

$2.$ Based on the information provided, what information is relevant to the decision to purchase the appliances? What information is irrelevant to the decision to purchase the appliances? Why?

$3.$ What could it cost the couple to launder clothes? Show your detailed calculations for each.

$4.$ The couple has made a significant investment in this business. How long will it take for the couple to recoup their investment? Is the time required to recoup the investment a good measure of the success of the company? If not, how would you measure the success of the company? Explain.

$5.$ As Hanadi, prepare a letter to the Morissons advising them on their laundry needs. What is your recommendation and why?

$6.$ The Morissons have a wait list for their day$-$care. They can hire an employee for $$9$ per hour for $40$ hours each week. With the additional employee, the Morissons can accept three additional children. Should the Morissons hire the additional employee? Show your detailed calculations.

$7.$ The Morissons home can accommodate a maximum of nine children. They can move the day$-$care from their home to rented space in town, which can accommodate up to $14$ children. The space will cost $$650$ per month and the utilities will will cost $$125$ per month. Additionally, insurance will now cost the Morissons $$5,000$ per year. Per city regulations, each adult can supervise no more than three children. As Hanadi, prepare a letter to the Morissons advising them on their space options. Should they continue to operate the facility at home or should they rent space in town? How many children should they accept? How many employees will they need to hire? Show your detailed calculations for each scenario.