In addition to your full-time job at Zelda Ltd, you volunteer for Able Senior Services , a not-for-profit entity. The entity provides services for elderly clients who are still living at home. Able Senior Services has three departments in three separate locations. One department provides meals, one department provides cleaning services, and one department provides health care services. Able Senior Services relies on client fees and a small grant from the state government to provide services. Following are the results from last years operations. Departments Meals Cleaning Health Total Visits 10000 10000 10000 30000 Revenues $50 000 $100 000 $150 000 $300 000 Variable costs (labour and supplies) 30000 50000 120000 200 000 Fixed overheads 4000 8000 10000 22000 Transportation ($4000 fixed + $5000 variable) 9000 9000 (10000 fixed + $2000 variable) 12000 12000 $5000 variable a 5000 5000 Headquarter costs allocated (based on revenues) 10000 20000 30000 60000 Total expenses 53000 90000 165000 308000 Surplus (deficit) (3000) 10000 (15000) (8000) a Nurses use their own cars In the past, the government provided small grants each year to cover losses for Able Senior Services. However, due to an increase in government expenditure on health in the current year, the government officials informed Able Senior Services that they would not provide any support to Able Senior Services next year. Considering these changes, the directors of Able Senior Servicesare trying to decide how to balance the budget. The directors are considering following options. Option 1: Close the department that provides health services for clients (Assume no alternative uses are planned for the health services building and no change would occur in headquarters costs) Option 2: Promote cleaning services to achieve additional 2000 clients (Assume no changes in fixed costs) Option 3: Close the meals division and lease that space to another organisation for $2000 per month. Required: Write a memo to the Directors of Able Senior Services covering the following aspects. Should discounted cashflows be used in this decision? Explain why or why not. Perform a quantitative analysis to decide which option would be beneficial to the Able Senior Services (Consider each option independently) Hint: Show the contribution margin per visit for each department and then estimate total surplus (deficit) for each option. Discuss Qualitative factors that the directors of Able Senior Services need to consider in making this decision. Mention possible trade-offs the directors of Able Senior Services might need to make in deciding what to do.