Superhero Baby (SB) is an on-call babysitting and playdate company that works in the area surrounding Chicago, IL. The majority of SB's customers are working parents who do not want a fulltime nanny. SB also currently offers their services at gala events, where parents can drop-off their children at the entrance and enjoy their evening. However, the gala event services have recently reflected net losses.
The following information relates to the costs involved in servicing gala events:
Revenue: $50/child
Direct Labor: 3 hours, @ $15/hour
Supplies (snacks, toys, art supplies, diapers, etc.): $10/child
Office scheduling expenses (treated as allocation of fixed overhead): $10/child
Average number of commercial services performed per month: 100
Management is considering discontinuing the gala event service segment of their business. By how much would Operating Income per month increase or decrease if this segment were dropped?

Question

Superhero Baby (SB) is an on-call babysitting and playdate company that works in the area surrounding Chicago, IL. The majority of SB's customers are working parents who do not want a fulltime nanny. SB also currently offers their services at gala events, where parents can drop-off their children at the entrance and enjoy their evening. However, the gala event services have recently reflected net losses. 
The following information relates to the costs involved in servicing gala events:
Revenue: $50/child
Direct Labor: 3 hours, @ $15/hour
Supplies (snacks, toys, art supplies, diapers, etc.): $10/child
Office scheduling expenses (treated as allocation of fixed overhead): $10/child
Average number of commercial services performed per month: 100
Management is considering discontinuing the gala event service segment of their business. By how much would Operating Income per month increase or decrease if this segment were dropped?

Quizplus · Accepted Answer

The Answer of Superhero Baby (SB) is an on-call babysitting and playdate company that works in the area surrounding Chicago, IL. The majority of SB's customers are working parents who do not want a fulltime nanny. SB also currently offers their services at gala events, where parents can drop-off their children at the entrance and enjoy their evening. However, the gala event services have recently reflected net losses. 
The following information relates to the costs involved in servicing gala events:
Revenue: $50/child
Direct Labor: 3 hours, @ $15/hour
Supplies (snacks, toys, art supplies, diapers, etc.): $10/child
Office scheduling expenses (treated as allocation of fixed overhead): $10/child
Average number of commercial services performed per month: 100
Management is considering discontinuing the gala event service segment of their business. By how much would Operating Income per month increase or decrease if this segment were dropped?

Superhero Baby (SB) Is an On-Call Babysitting and Playdate Company