Peter is a managing partner at a private equity firm, ABC. Among other fringe benefits, the firm offers a reduced-price daycare service to its employees.Peter is reviewing the segmental financials for his firm and is worried about the numbers reported by the daycare. "The daycare is a horrible loss-making proposition for us! It's losing close to $40,000 each year. We'd better cut our losses before its too late and shut this loser down!", says Peter. The daycare's financial figures for the year just ended follow.

Revenues $120,000 Variable costs 45,000 Traceable fixed costs 89,000 Allocated corporate overheads 24,000