1. [AQUINO, DIÑO]: Are you accounting for the license as a variable or fixed cost? What supports your computation that license cost is computed per person?
ANSWER [SARMIENTO, UY]: Government fees such as license is considered as a fixed cost. Regardless if the two of them are caring for four children, or six, the license fee would still be $225. To answer your second question, as what has been said in the problem, the facility is licensed to care for a maximum of six children, and that the city charges an annual fee of $225 to maintain the license. It was also stated in the case that according to state regulations, each adult can supervise no more than three children. Since there are two adults, Mr. and Mrs. Santos, they are only allowed to care for a maximum of six children. If they decide to increase their accommodation, hiring additional staff and acquiring licenses for them would be necessary.
2. [AQUINO, DIÑO]: Why do you recommend Option A for the space dilemma, while Option B does have more expenses, it yields more net income in the end as compared to A? Why is the revenue in the space differential analysis not included in the interpretation?
ANSWER [UY, ZAMORA, SOLIS, SARMIENTO]: Considering the uncertainty of having an increased net income due to the lack of data, it is still better for the couple to stay at the old facility since there is still a possibility that they could not reach the 14 children per day limit in the new facility they are considering. Also, if Mr. and Mrs. Santos were to consider moving their childcare business from their home to a larger rented facility in town, they have to take into account several factors. Aside from the obvious question of paying rent, additional insurance, and utility bills, the couple will also be faced with staff-hiring decisions along with the coverage of each employee’s license fees and their salaries.
3. [BABAO]: Aside from an increased net income, wouldn't opting for Option B (rented facility) also be beneficial for the Santos' as they will be able to draw a boundary and have separate spaces for work and home?
ANSWER [SOLIS, UERA]: As explained before, the option that yields more net income depends on several factors, one of which is the salary of the employees, which was not given in the case. If their annual salary is more than $19,350.00 per employee, then Option B would actually yield a lower net income than Option A, despite accommodating 5 more children. Furthermore, it was not stated in the case that they were having problems with the amount of space they currently have and that moving to the new facility would fix this problem. This makes it impossible to assume that the other facility would have enough space to draw a boundary to separate the workspace from their home, but their current home would not.
4. [DEPANTE]: For the computation of the annual cost of the appliances, why are the cost of installation and the cost of the delivery both considered? Does this indicate that yearly installation and delivery charges are made?
ANSWER [UY, TAN]: The cost of installation and cost of delivery were both divided by 8 to distribute its cost to the lifetime of the equipment.
5. [BAYLE]: What factors lead you to be confident that the company will last the 8 years needed to spread out the cost of the appliances?
ANSWER [SARMIENTO, UY, SOLIS]: The 8 years was only based on the lifetime of the equipment itself. This is the best case scenario for Mr. and Mrs. Santos to maximize the useful life of the appliances. Although if we are going to talk about the duration of the operation of the company, return of investment (ROI) and calculation for payback period could also be done to measure if the company would last for 8 years. We choose not to include these since we are focused on differential analysis wherein we compare the different alternatives and choose from those alternatives.
6. [ALVERO]: Equipment such as washers and dryers does not have an assurance that it would perform as efficiently as when it was bought during the 8 year span, hence, may need to undergo repairs and maintenance. Considering the possibility and costs of these, is it still a better option compared to option 1?
ANSWER [UY, SIA, UGALDE]: This still depends on the costs of the repairs and maintenance, although in buying new equipment there are pieces of information that were not given such as the warranty of the equipment bought, if such information was given, it would be possible to know if option 1 is better than option 3.
7. [CUNANAN]: The cost of increased energy cost is considered when it comes to purchasing new equipment. Will factors like an increase in energy prices tip the scales when opting for laundering services?
ANSWER [SARMIENTO, UY, ZAMORA]: Based on our understanding, a combined amount of $265.00, accounting for the energy costs of both the washer and dryer, is added to the annual energy cost of the company. This means that energy cost will not increase annually by $265.00 (if this is the case, by the eighth year, the increase in energy cost will already amount to $2,120 which, realistically speaking, is unlikely) but there will be an increase of $265 in the annual costs when the washer and dryer are bought. However, assuming that the energy costs would annually increase (which may be brought about by an increase in prices in the global electricity market), it is possible that the laundering services would also increase their prices. Hence, this increase in energy costs would be reflected in both situations: opting for laundering services and purchasing appliances.
8. [GOBACO]: Do you think that the increased cost of option 1 (Labadabango) compared to option 3 (purchase new appliances) is justified given the fact that the Santos couple are already senior citizens who may find the extra physical labor of option 3 too difficult?
ANSWER [SARMIENTO, UY]: The decision made in the case was based only on the option that would cost the least. Age was not considered as a defining factor because this would entail a subjective perception of what people at age 60 can or cannot do.
9. [DY]: If annual license cost was considered as a per-person cost, why was the annual license cost for the employees included in the computation of the annual cost of the business?
ANSWER [UY, SOLIS, SARMIENTO]: Due to the lack of information, it was assumed that the business would be the one to pay for the license of the hired employees. Since each employee/ adult is allowed to take care of only 3 children, this would mean that if the business is operating at full capacity (14 children), there should be at least 5 licensed adults on the premises.
