Case Mini Write-Up: Appaloosa County Day Care Center, Inc.

Case Mini Write-up: Appaloosa County Day Care Center, Inc.

(a) summary of facts

• mission: provide affordable childcare to working-class families

• board members bring experience in human services but not accounting or financial background

• ACDC struggled to meet its financial obligations

o Reasons: perceptions and preferences, poor administrative services

• Daycare industry has very low profit margins, approx. 4%

• 70 percent of the center’s total costs attribute to wages and other employee related costs

• High costs for licensing regulations

• Other costs include: occupancy costs, food, insurance, supplies, programming expenses

• New board of directors changed mission and facility

• Center changed to higher quality facility

• Leases floor space or rooms to Head Start program and school district

• Costs

o Labor costs: 40 hours per week, while maintaining staff-to-child ratio, costs include wages, FICA and SUTA rate, no employee benefits

o Food costs: included in tuition fee, all children and staff receive breakfast, lunch, and two snacks per day

o Occupancy costs: Head Start and school district share costs of the loan and building, ACDA pays the bills for entire facility (except phone), ACDC pays building expenses such as maintenance, cleaning supplies, and sanitation

o Insurance costs: property, general liability, officer’s bond, and worker’s compensation

o Other operating costs: accounting, advertising, continuing education, supplies

(b) major problem(s) as you see them

The major problem is that ACDC operates unprofitable right now. The reason is that not all existing costs are allocated correctly to the existing channels, which are the daycare and the tenants. As a result, the center cannot determine which channels are profitable and which are not, and therefore, cannot correctly decide which actions to take in order to bring the daycare back on the right track.

(c) brief discussion of the case

In order to allocate its costs, the...