Question
It's close to a $40,000 loser and we ought to devote our efforts elsewhere, noted Karenne Whitmore, after reviewing financial reports of her company's attempt
"It's close to a $40,000 loser and we ought to devote our efforts elsewhere," noted Karenne Whitmore, 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. Revenues $12,000.00 Variable Costs $45,000.00 Traceable Fixed Costs $89,000.00 Allocated Corporate Overhead $24,000.00. 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. A. Show calculations that support Whitmore's belief that the daycare center lost almost $40,000.
A. Should the center be closed? Show calculations to support your answer.
Is this the right formula?
Contribution Magin - Saving Traceable fixed Cost + One time Closure Cost= 19,500 If so how does a positve 75k- 62,300 traceable saving + -6,800= 19,500? |
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