The Little Beaver Daycare Centres, a not-for-profit organization, provides dayca

Question

The Little Beaver Daycare Centres, a not-for-profit organization, provides daycare services to low-income families in 20 communities in Alberta. The manager’s summary report for the past four months of operations is reproduced here:

$

4,230

$

4,180

$

3,875

$

4,260

$

16,545

2,854

2,776

2,671

2,828

11,129

23,713

23,533

23,282

24,856

95,384

$

(19,483)

$

(19,353)

$

(19,407)

$

(20,596)

$

(78,839)

The daycare receives an operating subsidy from the province, but unfortunately, the operating loss that has been incurred through June $(79,392) is larger than anticipated. Part of the problem is the salary increase that went into effect in June, which had been overlooked when the budget was submitted to the city last year. To compound the problem, the warm summer months traditionally bring with them an increase in additional summer outdoor activities. Thus, the daycare experiences additional costs during July.

The daycare’s managers are considering an increase in daycare fees to reduce losses. However, they are reluctant to raise fees because the children are from low-income families. The daycare will raise fees only if necessary.

List as many reasons as you can why management of the Little Beaver Daycare Centres cannot know with certainty what the expenses will be during July.

Describe the pros and cons of using the cost estimate to estimate July expenses based on a projection of 940 children to decide whether to raise daycare fees.

The managers need your July cost estimate to help them decide whether to raise daycare fees. Turn in your answer to the following.

Use the information you learned from the preceding analyses to write a memo to the director of the Little Beaver Daycare Centres, presenting your estimate of July costs. Provide the director with appropriate information for understanding your methodology and evaluating the reliability of your cost estimate.

The Little Beaver Daycare Centres, a not-for-profit organization, provides daycare services to low-income families in 20 communities in Alberta. The manager’s summary report for the past four months of operations is reproduced here:

March April May June Total Number of children 849 821 778 842 3,290 Daycare fees

$

4,230

$

4,180

$

3,875

$

4,260

$

16,545

Daycare staff salaries 13,254 13,256 13,254 14,115 53,879 Daycare supplies used 3,182 3,077 2,934 3,175 12,368 Administrative salaries 3,197 3,198 3,197 3,412 13,004 Rent 1,000 1,000 1,000 1,100 4,100 Utilities 226 226 226 226 904 Other expenses

2,854

2,776

2,671

2,828

11,129

Total expenses

23,713

23,533

23,282

24,856

95,384

Operating surplus (loss)

$

(19,483)

$

(19,353)

$

(19,407)

$

(20,596)

$

(78,839)

The daycare receives an operating subsidy from the province, but unfortunately, the operating loss that has been incurred through June $(79,392) is larger than anticipated. Part of the problem is the salary increase that went into effect in June, which had been overlooked when the budget was submitted to the city last year. To compound the problem, the warm summer months traditionally bring with them an increase in additional summer outdoor activities. Thus, the daycare experiences additional costs during July.

The daycare’s managers are considering an increase in daycare fees to reduce losses. However, they are reluctant to raise fees because the children are from low-income families. The daycare will raise fees only if necessary.

Explanation / Answer

A}

B}

The con of using the cost estimate for July is that the other expenses cannot be estimated. Based on the cost estimates of April-June, the rent, utlities and salaries shall be same as June. Only Other expenses shall vary. The pro of using the cost estimate is, that major part of the overall expense is fixed.

c) Dear Director,

PFA my analysis of the expected costs for July for Little Beaver daycare

Net expenses

The Other Expenses shall be subject to increase depending upon the magnitude of outdoor activities. Rent, salaries, utilities are fixed expenses.

Revenue for 940 students at $5.05 per student      4,756 Daycare staff salaries    14,115 Daycare supplies ( dierectly proprtional to no. Of children)      3,545 Administrative Salaries      3,412 Rent      1,100 Utilities         226 Other expenses (estimated)      3,187

Net expenses

-20,829

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