You have just taken over the management of a public organization where cleaning services are traditionally outsourced fo

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You have just taken over the management of a public organization
where cleaning services are traditionally outsourced for €1,240,000
annually, including:
s/n
Expenditure
Value in €
1
Payroll and replacement costa for 63 full-time
employees
836,000
2
Consumables
80,000
3
Personal hygiene products (toilet paper, hand towels,
sponges)
31,000
4
Tools and cleaning machines (depreciation, damage,
maintenance)
7,000
5
Uniforms (purchase and washing)
3,000
6
Administrative costs
28,000
7
Contract turnover
15,000
8
VAT 24%
240,000
Total
1,240,000
aIn case of absence (sick leave etc.) the contractor
has to replace the absentee. Thus, there are no fluctuations
regarding the quantity of cleaning services, which means that 2,520
man-hours (63 people x 5 days per week x 8 hours per day) are
provided for each one of the 52 weeks of the year.
Alternatively, the organization may discontinue the outsourcing
contract, recruit cleaners and purchase cleaning materials and
equipment. In this case, you estimated the following costs:
• Average labor cost of €1,270 / employee / month (12 months /
year), which raises by 4% on completion of 3 years of work.
• Supply of materials and operating costs similar to those of
the contractor (s/n 2,3,5) of €140,000 / year.
• Acquisition of cleaning equipment at €54,000 of a 5-year
useful life, at the end of which it will not be usable.
• Equipment maintenance and repairs at €1,000 / year.
• Administrative costs at €4,000 / year.
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