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alternative than closing the Snuggles program. What do you think? Show your calculations by completing the following projected monthly income statement with the new data.

alternative than closing the Snuggles program. What do you think? Show your calculations by completing the following projected monthly income statement with the new data.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cecily Good is the director of the Young Minds Childcare Centre and recently hired you as the financial controller. You have worked mainly in the for-profit sector as a business analyst for various manufacturing companies. This is the first non-profit organization that you have worked for, and you are excited about the programs and services the centre offers. Cecily is hoping your knowledge of management accounting will help her assess the viability of each of the programs that are run through the centre. The centre has three programs: Snuggles, Smart Kids and Mosaic. Snuggles is s program that provides early childcare for children age 12 months to 3 years. Smart Kids is an early literacy program for preschoolers age 4 to 5, while Mosaic is a blend of educational and fun after-school programs for kids ages 5- 12 years. Cecily has prepared the following analysis of each of the programs at the centre: Snuggles Smart Kids Mosaic Total Students at capacity 25 40 50 115 Actual number of students 24 38 45 107 Fee per Student per Month 300 200 300 Variable cost per Student 160 50 $ 95 Contribution Margin per Student 140 150 205 Total CM per month 3,360 $ 5,700 $ 9,225 $ 18,285 2,500 $ 2,174 $ 1,314 $ 2,000 $ 3,478 $ Program fixed costs 4,300 8,800 Allocated fixed costs* 4,348 $ 10,000 Surplus (Deficit) -Ş 222 577 -$ 515 *Cecily has allocated facility rent and utilities over the three programs based on student capacity. Cecily's main goal is to breakeven on her costs each year. The centre receives no external funding but has been able to maintain operations on a fee-for-usage basis. However, looking at the above numbers, Cecily is feeling that maybe the Snuggles program is creating an overall deficit for the center. She has asked you to investigate whether the Snuggles program should be discontinued. Required 2. Eric Chang, the head of the Mosaic program, mentioned to Cecily there is a new potential demand for the afterschool program that exceeds what they are able to serve. Although they are currently under capacity for the Mosaic program, a new school opening in the community may change this. He feels that the afterschool program could be expanded to 75 kids within the confines of the existing facility if they could hire a new facilitator for $45,000 per year and purchase some desks and furniture for $20,000. The centre normally depreciates capital asset purchases over their useful life. In this case, Eric feels the furnishings should last 5 years. Cecily thinks this might be a better alternative than closing the Snuggles program. What do you think? Show your calculations by completing the following projected monthly income statement with the new data. Young Minds Childcare Centre Monthly Projected Income Statement Snuggles Smart Kids Mosaic Total Revenues Variable cost Contribution Margin Program fixed costs Allocated fixed costs Surplus (Deficit)
Transcribed Image Text:Cecily Good is the director of the Young Minds Childcare Centre and recently hired you as the financial controller. You have worked mainly in the for-profit sector as a business analyst for various manufacturing companies. This is the first non-profit organization that you have worked for, and you are excited about the programs and services the centre offers. Cecily is hoping your knowledge of management accounting will help her assess the viability of each of the programs that are run through the centre. The centre has three programs: Snuggles, Smart Kids and Mosaic. Snuggles is s program that provides early childcare for children age 12 months to 3 years. Smart Kids is an early literacy program for preschoolers age 4 to 5, while Mosaic is a blend of educational and fun after-school programs for kids ages 5- 12 years. Cecily has prepared the following analysis of each of the programs at the centre: Snuggles Smart Kids Mosaic Total Students at capacity 25 40 50 115 Actual number of students 24 38 45 107 Fee per Student per Month 300 200 300 Variable cost per Student 160 50 $ 95 Contribution Margin per Student 140 150 205 Total CM per month 3,360 $ 5,700 $ 9,225 $ 18,285 2,500 $ 2,174 $ 1,314 $ 2,000 $ 3,478 $ Program fixed costs 4,300 8,800 Allocated fixed costs* 4,348 $ 10,000 Surplus (Deficit) -Ş 222 577 -$ 515 *Cecily has allocated facility rent and utilities over the three programs based on student capacity. Cecily's main goal is to breakeven on her costs each year. The centre receives no external funding but has been able to maintain operations on a fee-for-usage basis. However, looking at the above numbers, Cecily is feeling that maybe the Snuggles program is creating an overall deficit for the center. She has asked you to investigate whether the Snuggles program should be discontinued. Required 2. Eric Chang, the head of the Mosaic program, mentioned to Cecily there is a new potential demand for the afterschool program that exceeds what they are able to serve. Although they are currently under capacity for the Mosaic program, a new school opening in the community may change this. He feels that the afterschool program could be expanded to 75 kids within the confines of the existing facility if they could hire a new facilitator for $45,000 per year and purchase some desks and furniture for $20,000. The centre normally depreciates capital asset purchases over their useful life. In this case, Eric feels the furnishings should last 5 years. Cecily thinks this might be a better alternative than closing the Snuggles program. What do you think? Show your calculations by completing the following projected monthly income statement with the new data. Young Minds Childcare Centre Monthly Projected Income Statement Snuggles Smart Kids Mosaic Total Revenues Variable cost Contribution Margin Program fixed costs Allocated fixed costs Surplus (Deficit)
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