20 Mar Purpose:This assignment aims at developing your un
Purpose:This assignment aims at developing your understanding of cost concepts, and demonstrate your ability toapply your knowledge of cost concepts to a service-based company. Additionally, you are to critically evaluatea journal article to analyse the practical use of accounting information to real-life companies’ decision-makingand achievement of business goals.Assignment Structure should be as the following:Part A: Case Study Analysis (15 Marks)You are to answer the 5 questions relating to the case study of a child care business. It includes both theoryand calculation type questions. Do show your working for the calculations.Case BackgroundDouglas and Pamela Frank are a married couple. They both worked for a railroad company for 30 years. At age57, Douglas and age 52, Pamela retired and moved to the small town of Ovilla, Texas, which has a populationof approximately 3,500 residents. When the Franks moved to the town, they decided to start a child carebusiness in their home called Nanna’s House. Nanna’s House is licensed by the state. The state charges anannual fee of $225 to maintain the license. Insurance is required at a cost of $3,840 annually. The facility islicensed to care for a maximum of six children. The Franks charge a fee of $800 per month for each child. Themonthly fee is based on a full day of care, from 8:00 a.m. to 4:00 p.m. If additional time is required beyond4:00 p.m., parents must pay an additional charge of $15 per hour for each child. The couple provides twomeals and a snack for the children. The cost of the meals and snack is $3.20 per child per day. There are sixchildren currently enrolled.The facility is very nice. It is an 820 square foot addition to their home that was built in 1964. The Frankspurchased the home and completed the renovations for $79,500 and they believe the addition has a usefullife of 25 years. The facility has a large open space for play, reading, and other activities. There is a section forsleeping which contains small cots. The facility is equipped with a small kitchen, two bathrooms and a smalllaundry area. The daycare increased the Franks’ utility cost by $50 each month.During the first week of operations, the washer and dryer stopped working. Both appliances were old and hadbeen used by the couple for many years. The old appliances cost a total of $440. While a laundry room wasnot initially a necessity, it became increasingly important for laundering the soiled clothes of the children,blankets, and sheets. A company nearby, Red Oak Laundry and Dry Cleaning, can launder clothing for theFranks, including pick-up and delivery, for $52 per month. Alternatively, the Franks can take clothes to thelaundromat once a week, which is three miles away (one way). The applicable mileage rate is $0.56/mile. Theycan launder the clothes themselves at a cost of $8 per week. The self-service alternative does not includedetergent or fabric sheets. The couple would need to purchase these items in order to use the laundromat.Purchasing laundry supplies in bulk from MegaMart would cost $35 every quarter. The final alternative is forthe Franks to purchase a washer and dryer. The cost of the appliances is: washer $420 and dryer $380. Theadditional accessories for both appliances, needed for installation, cost $43.72. The store will deliver theappliances at a total cost of $35. The cost of installing the appliances is free. Both appliances are expected tolast 8 years. According to the manufacturer the washer will increase energy costs by $120 per year. The dryerwill increase energy costs by $145 per year.The Franks need some assistance in decision making and evaluation. They have contacted you, theiraccountant, to provide some advice.
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