Lydia looked troubled and consulted you on a personal problem, since you are an experienced parent. She is pregnant for the third time and she is expecting twins. Her mother-in-law takes care of the kids, with the help of a maid. They have a part-time cleaner but the cleaner decided to leave in 1 months time. With 2 more babies coming along, her mother-in-law had voiced concerns of her inability to cope. Lydia felt the most effective way was to hire a part-time cleaner and a local nanny to assist her mother-in-law. Lydias husband was supportive and had volunteered to pay for the incremental costs of getting these extra help. He currently does not pay for the domestic helper related expenses. Lydia only needs to work out the total annual incremental costs and inform her husband accordingly. Lydia is not good with numbers and finds this very challenging. She has asked you to help work out the incremental costs. Additional information Lydia has provided;

1 local nanny costs about S$2,000 monthly and her current part-time cleaner charges S$800 monthly. However, she heard from her best friend that the market rate for part-time cleaner has gone up to S$900. Her best friend works in a domestic recruitment agency and is a trusted source.

Their contracts do not have AWS and allowances.

a) She heard from her best friend that the market rate for part-time cleaner has gone up to $900.

i) What is a market rate?

ii) How has the market rate affected her consideration?

b) Based on the above information, calculate

i) the monthly incremental cost of replacement for part-time cleaner.

ii) monthly cost of engaging 1 local nanny.

iii) the total annual amount Lydia should ask from her husband for replacing the part-time cleaner and hiring the local nanny.

c) One month later, Lydia informed you that her husband has just suffered a pay cut and he can only pay S$1,000 per month, instead of what has been previously calculated. What is the annual shortfall that Lydia has to make up?