Scarpe case study

“Tots R Us” Case

Background:

Over the past years, Tots R Us has been controlling and managing a small preschool program for various young children between the ages of two and four for many decades. In the suburban area of Boston, TRU was among the leading privately managed programs, and this program mainly aimed at gaining profits for the services that they offered. Children in the preschool program were divided into three major groups based on their age, which resulted in the formation of three groups: children in the age of two, three, and four years. Each age group would attend two classes each day which summed up to six classes in the institution every day. These classes could be held between the month of September and June, in which they were held in the morning and in the afternoon for every five days of the week. TRU had a competitive advantage over the other facilities because nearly one-third of its competitors offered classes during summer. The morning classes could start at 9:00 a.m. and end at noon, while the afternoon classes could begin at 1:00 p.m. and end at 4:00 p.m. Although lunch was not served in either the morning or afternoon classes, the children were served a snack.

The attendance of the children varied each day, and it was estimated to range between nine to fifteen learners for each class despite there being much pressure from the parents to decrease the sizes of the classes. Later, one of the parents came up with an idea and suggested that the institution should start hosting birthday parties during weekends because some of the classrooms of TRU were empty. The parent's suggestion seemed to be a significant idea since the school would be able to utilize the space that was not being used and acquire more revenue. Within a short period, the school was able to establish sizeable side business hosting birthday parties, and within a year, nearly one hundred and fifty parties had been held in the three classes during the weekends.

The school incurred various expenses in relation to the services it provided, but the largest expense was associated with the building that TRU had purchased and modified into a daycare and settings of normal schoolhouses. Initially, this building was a single-family home, and it cost approximately $400,000, including costs for renovations and applications of the license, which summed up to $50,000. Other expenses that were related to the building consisted of property taxes, cleaning, maintenance, utilities, and depreciation. The salaries, supplies, and food that were offered in the institution were mainly centered on the meeting in which the meeting could either be one class meeting for three hours or a single birthday party for four hours. The total cost of food and supplies for the birthday parties in the previous year was $3,000, while the actual cost for the preschool classes was roughly $18,000.

The institution had five workers, including three full-time and two part-time employees. The director of the institution who taught two of the preschool classes every day and managed the preschool and the birthday party programs earned $50,000. The other two full-time workers earned $20,000 every year and taught the remaining four preschool classes while the part-time employees could manage and control the birthday parties on weekends, and each of them acquired $5,000 annually. Irrespective of the number of children who attended each birthday party, TRU charged $200 and averaged a sum of $270 for every preschool class session based on the number of learners in the class. Nevertheless, there are various changes that have been made in the school, with the children's day being divided into a two-hour core class and a one-hour elective class. The elective is targeted at enhancing and embracing new ideas and teaching methods in classroom settings.

Issue:

Are the strategies used to maintain cost control effective and suitable?

Alternatives:

1. Modifying and reviewing the cost control systems of the school

2. Provision of daily updates

3. Expanding the preschool classes

4. Increasing the number of birthday parties every weekend

5. Utilizing the three empty classes to host birthday parties

6. Uniformity

7. Time planning

Analysis of Alternatives:

Alternative 1. Modifying and reviewing the cost control systems of the school- Optimal

The alternative of modifying and reviewing the cost control system of the school is optimal because a successful control system will comprehensively outline the foundations of the preschool programs. The control systems should be subject to both small and big changes in the institution, which implies that the director should subject the control systems to various changes according to the actions of their competitors.

Alternative 2. Provision of daily updates- Optimal

Provision of daily updates is optimal since it is the best way to begin controlling and managing costs. It will include obtaining the daily updates of all potential short and long-term expenditures in the institution. Acquiring the value of daily expenditures and sales will assist in reducing or eliminating all the potential problems that might take place.

Alternative 3. Expanding the preschool classes- Suboptimal

The alternative of expanding preschool classes is suboptimal because there are already three empty classrooms that can be used to host birthday parties. The funds which can be used to construct and expand the preschool classes should instead be used to cover other expenses such as paying salaries and wages to both the full-time and part-time employees.

Alternative 4. Increasing the number of birthday parties every weekend- Optimal

This alternative of increasing the number of birthday parties being held each weekend is optimal because it will result in the generation of more revenue. Allowing more children to host their birthday parties in the institution every weekend will lead to the institution gaining more income compared to the current funds that are acquired from the few children.

Alternative 5. Utilizing the three empty classes to host birthday parties- Optimal

This alternative is optimal because it will prevent the school from spending more cash in building other classes for hosting the birthday parties. This will promote savings and prevent other expenses such as the maintenance costs for the new classes.

Alternative 6. Enhance uniformity- Optimal

Uniformity is optimal because it entails deriving the best outputs at the least cost; hence the director can make a long-term agreement with the workers regarding the quality of services that are offered in the school. This will promote the delivery of services in a timely and assured manner.

Alternative 7. Time planning- Optimal

Time planning is optimal since it is of much value in any organization and institution. The director should explain to the workers the expenditures that the institution incurs per hour; hence they will all be able to work towards managing time appropriately.

Recommendation:

This report recommends:

· Modification and reviewing of the cost control systems of the school

· Provision of daily updates

· Increasing the number of birthday parties every weekend

· Utilizing the three empty classes to hold birthday parties

· Enhance uniformity

· Time planning