The GrAde Final only

Analysis:

According to the assumptions, the budget for the next year is prepared in the above-mentioned table. For the coming year the revenues of the daycare are expected to increase by 15%, therefore their revenues increase from $141,926 to $163214.9. In the next year, two more teachers will join the day car as permanent teachers hence their salaries would be $40000 for both teachers. Therefore, the salaries from the previous year have increased from $114,108 to $154108. Due to increase in this total salary, the overall salary expense also increased from $248,738 to $288738. This addition to salary leads to increase in overall expense of daycare that is increased from $391,252 to $431252. Hence, we can say that there is a significant increase in expense from the previous year. The total revenues of this are -268037.1 that is greater than from last year. In the last year, the budget deficit was -$249,326. The budgeted revenues for both years are in deficit because no revenues are generated due to the high amount of expense. But in this year the deficit is greater than from the previous year.

Based on your analysis of the most recent profit and loss statement for the university day care center, compare the actual to budgeted revenues and expenses.

The budgeted revenues that were anticipated was $ 329194 but the revenues in actual were $ 141, 926 there is approximately 50% difference in the revenues that was budgeted and that was actual. The total salary expense was assumed $310200 while the actual salary expense was $248,738. The supplies expenses were presented in the budget was $30650 while in actual the supplies expense was $16785. Other expenses on the daycare were presented in the budget with an amount of $80,100 while the other expenses are $71,007. Compiling all the expenses that were calculated in the budget was $489,194 while in actual the total expenses that incurred was $391,252. The number of total revenues fewer expenses was ($160,000) while it is ($249,326). Hence, it shows that there is a great difference in budget and actual spending. There is a huge difference in actual spending and the amount of deficit shows that revenues that are presented in the budget were not based on reality.

Analyze the fiscal budget at the University Day Care Center (UDC). What is the source of the financial problems?

The budget that is presented at the University Day Care Center has many financial problems in which some of the things are overstated and some of them are unstated due to which the budget that is presented is not up to mark or matches with the reality. Starting with an enrolment of employees that are allowed for the Day Care Center when this runs at the full capacity are twelve employees under which one is a director, six are teachers, three instructors, five aids and hard time clerical workers. Theses number of workers are decided. But in the budget, these employees are overstated because according to the current capacity of daycare only 12 workers are needed but the daycare employees 15 workers.

Currently, they need a director, 1.5 instructor in which one is full time and another one for halftime, aides will be three and only 1 clerical staff is requiring that is part-time. All this difference in the hiring of staff will help in saving of considerable amount. The amount of $ 64818 can be saved. When the less number of employees hire fewer fringe benefits will be given to them. furthermore, the amount of other expenses Laundry, maintenance occurs after every two months. Hence a handsome amount can be saved from it. The maintenance expense is overstated that with 13000. Classroom supplies is also a one-time expense that occurs one time it is also overstated. The major financial problem that s analyzed is at the revenue side that is generated from enrollment of children. The difference of $187268 leads the budget to deficient. The average fee of children enrollment is overstated in a budget.

Compare the budget to actuals and explain the reason for the differences.

The staff enrollment was 9 at the end of the year while the actual enrollment is 12 that causes $64818 variance. The budgeted fringe benefits that were set were $68244 whole the actual fringe benefits were $54722. Hence this creates a positive variance of $13522. There is a positive variance in suppliers and other expenses as well that is the total amount of $22,958. While comparing the budget to the actual budget it is analyzed that, there is a major difference between the actual and budgeted amount. The major differences are recorded in salaries and revenues.

From the above analysis, it is evaluated that University Day Care Center is in a tough position and it is critical for them to decide on the type of enrollee mix that will fit on the mission of Daycare center and at the same time it is also evaluated that it needs enough revenues to continue their operations.

The recommendation that I made from analysis of actual and budgeted amount is that management must maintain a current enrollment or if possible, they must decrease number of employees of part-time. They should focus on maintaining or increasing full-time enrollees. This will create a steady revenues stream and it also helps in terminating teachers if there are few enrollees. The University Daycare cannot be profitable overnight; therefore, the goal of the company should be on the decrease of the deficit and they should bargain for a larger subsidy.

As the controller, what corrective action would you recommend to management to continue the daycare center? Defend your recommendation

Below mentioned are some of the corrective actions that management will take to continue daycare center:

Corrective action 1

• The management can continue to employee’s full-time staff to support the full-time capacity. Due to which the current cost incurred as it remains the same and Day Care center will operate at a loss so that they can anticipate of and unless and until they reach a full capacity.

Corrective action 2

• The daycare center can choose to offer different plans for part-time enrollees. It will allow them to sign up for the services of the daycare only on specific days of the week. In this way, the university day care center management can ensure that they are not to be overstated and understated on any given day. Under this option, it is enough for the university day care center to enroll full-time staff to support their full-time enrollment. In this way, they will be able to handle varying demand of their part-time enrollee through the hiring of part-time staff as per the need.

Corrective action 3:

• The daycare center can only choose to enroll full-time students and they will hire just enough full-time staff that support only full-time enrollment. In this way, the overstaffing and understaffing will not be an issue as the schedules for the enrollees are fixed and it also help in scheduling the staff that matches with demand.

The corrective action 3 is recommended. This is justified because the hiring of full-time staff so that they can support the full capacity of 42 children. But in actual the current enrollment is only 23 children and it is very costly. As there is mentioned in Issue II that part-time enrollees will provide a negative contribution margin. Therefore, it is highly recommended that only preferred to enroll full-time students. Currently, there are only 18 full-time enrollments and the salaries expense that is associated with it require to support this enrollment that is approximately $183,920.

The salaries expense that will incur to support these 23 students that include both part time and full time is $ 183 920 and it not just for the 18 full-time students. Moreover, it is analyzed that due to overstaffing and understaffing issues, the $183,920 figure is the mean amount that will be used to spend on salaries. It is because $183,920 is considered as a reasonable amount and it is a safe amount that is used to allocate as salaries expense to support 18 full-time students. Finally, it is also pertinent to mention that as the enrolment of University Day Care Center grows the staff will also increase accordingly. By complying it with this recommendation the university day care center will satisfy their staffing need by reducing the salaries expenses by $64,818 to $ 183,920 and ensuring its sustainability for the coming year.

Memorandum

To: Board of Director

University Day care Center

From: Mr. ABC

Finance Controller.

Re: Analysis of Performance of Company’s Ratio

Date: June 14, 2018

Due to the growing concern about the financial health of University Day Care Center, I would like to high some of the important recommendations that I believe could help in reducing the deficit. It will also help in the planning of future budget and operate it viable. The first recommendation is the maintain the current enrollment by enrolling the full-time employees. This will also help in maintaining the child to teacher ration as it helps in prevention of overstaffing and understaffing. For reducing the deficit, some of the teachers will have to be terminated. The lower enrollees will help in justifying the termination as it will help in reducing the overall deficit. The survey that was conducted on 300 university employees will have an overwhelmingly positive impact in favor of day care center. More orientation sessions and promotions must be organized. It will highlight the services that are provided to all university employees. by providing these services to outside applicants will help in increasing the revenues of the daycare. Hence, it will help in the survival of Daycare in long-term, it will help in exploring other revenues streams and providing the services to outside applicants can help in reducing this issue.

Sincerely,

Mr. ABC.

Source

O’Brien, M. (1979). The Toddler Center: A Practical Guide to Day Care for One-and Two-Year-Olds.The Toddler Center: A Practical Guide to Day Care for One-and Two-Year-Olds.