Question

Suppose that Elite Daycare provides two different services, full-time childcare for preschoolers, and after-school care for older children. The director would like to estimate an annual cost per child in each of the daycare programs, ignoring any facility-sustaining costs. She is considering expanding the services and wants to know whether full-time or after-school care is more profitable.
The following activities and annual costs apply to the daycare center. Salaries and wages are $100,000. Full-time children arrive between 8:00 and 9:00 A.M. Older children arrive about 3:00 P.M. All of the children are gone by 6:00 P.M. Employees estimate that they spend about 20% of their time on meal-related activities, 20% supervising naps or recreation, 10% in greeting or sending children home, and the rest of the time presenting educational experiences to the children.
Meals and snacks cost about $20,000. Preschoolers receive two snacks and one meal per day, and the older children receive one snack per day. On average, snacks and meals do not differ in cost. Supplies cost $10,000 for the full-time childcare program and $8,000 for the after-school program.
Currently, 30 children participate in full-time care and 10 children in after-school care. Because
Elite Daycare maintains a waiting list for openings in its programs, the number of children in each program remains steady.

REQUIRED
A. Identify a cost object and then choose a set of activities and cost drivers for Elite Day-care’s ABC system. Explain your choices.
B. Using the activities you chose in part (A), estimate the annual cost per child in each program.
C. Do uncertainties exist about the proportion of salaries and wages that should be allocated to full-time care versus after-school care? Why or why not?



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  • CreatedJanuary 26, 2015
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