1. Identify the services or programs to be included in the cost and profitability analysis. Infant childcare
2. Examine the costs listed in Table 2.
a. Identify the direct costs associated with each service or program. Labor cost is associated with each service and program. Food cost is associated to the kitchen area but indirect to the end services. b. Which costs would be organization-sustaining costs? Provide an argument for or against assigning these costs to services or programs. Organization-sustaining costs include depreciation, building insurance and interest expense on mortgage debt. Both ACDC and tenant use the facility and should participate in the cost associated with acquiring the space.
3. Identify the broad activity categories and create cost pools by assigning the costs from Table 2 to the pools. Occupancy Cost- Indirect
Employee Support cost
General and administrative cost
Program support cost
Occupancy cost- Building Usage
Wage Expenses- Direct
4. Identify the cost drivers that have a causal relationship to the activity cost pools created in Question 3.
Employee support costs
Number of ACDC program employees
General and administrative costs
Total number of children enrolled
Program support cost
Total daily population at ACDC
Occupancy costs- Building usage
Total daily population in building
Wages expenses- Direct
Number of employees assigned to rooms
5. Calculate the activity or cost-driver rates for each cost pool. Note: You should develop rates that will allocate costs to ACDC programs and/or tenants only. You should not allocate any costs back to general administration.
6. Using the services or programs identified in Question 1, determine service or program revenues, assign the costs to the service or programs, and calculate service or program profitability. A spreadsheet may be helpful with this task.
7. Based upon your calculations in Question 6, which services or programs are operating successfully? What appears to be the determining factor in whether the service or program is profitable? Toddler Care and Pre-K care are the two programs that are running successfully.
8. Discuss at least three alternatives for improving the overall profitability of the daycare facility. Three alternatives for improving the overall profitability of the daycare facility are infant care, school district tenant and head start tenant.