Daycare Center Exhibit 1 Daycare Center Budget Fiscal Year


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to that question is, it depends on whether fixed costs have been recovered by revenue. The contribution margin per FTE is the revenue per FTE minus the variable costs per FTE. The contribution margin covers fixed costs and (hopefully) profit. What is the budgeted average revenue and expense per average student FTE per year? What is the budgeted contribution margin per FTE per year? How many FTE contribution margins are needed to pay for the full fixed costs in the budget? That answer is the breakeven point in number of average FTEs for the year per the budget. Breakeven Analysis What is the budgeted breakeven number of FTEs? What is the actual breakeven number of FTEs? Why is the actual breakeven lower than the budgeted breakeven? Why is the actual net income (loss) per FTE different than the budgeted net income per FTE? Developing the Cost/Volume/Profit Chart Many times a picture communicates more than words or calculations. A cost/volume/profit chart shows you all the possible profit and loss positions for your business at a particular moment in time. It visually shows you how much profit or loss you would earn for a given number of FTEs. Prepare a cost/volume/profit chart for the Daycare Center using the budgeted data. The possible range of FTEs should be on your x axis; also include dollars showing fixed variable cost, as well as sales by FTEs. Show the breakeven point in terms of FTEs. What do you estimate the relevant range to be? Prepare a cost/volume/profit chart for the Daycare Center using the forecasted year’s actual six-month data plus your forecasted Q3 and Q4 data to form the year. Show the breakeven point in terms of FTEs. Explain the reasons for the differences between forecast and budget. PAPER Prepare a report for the director that discusses the opportunities for improvement and provide general suggestions of how the financial situation could be improved. The paper should provide an introduction that explains what you will talk about followed by the details of the current financial situation. Discuss the opportunities for improvement and provide general suggestions of how the financial situation could be improved. Conclude with your recommendations. Be sure to include the following: A Fixed versus Variable Analysis Cost Function Analysis: Calculate the cost function utilizing the following three methods. Provide a discussion of which of the three methods gives the most accurate cost function and why. Account Analysis Method High-Low Method Regression Analysis Method Forecast: Using the Account Analysis Method prepare a forecast for the third and fourth quarters based on current management strategy – include a row for expected FTEs by quarter. Prepare a Proforma Forecast versus Budget for the current year Determine Profitability by FTE Calculate Breakeven Prepare a Cost/Volume/Profit Chart using the budgeted data and one using the forecasted data. Explain any differences. ATTACHMENT PREVIEW Download attachment Copy of Daycare Center Exhibits Revised.xlsx Daycare Center Exhibit 1 Daycare Center Budget Fiscal Year 2012-2013 Budget Q1 Average FTEs Revenue Expenses Advertising/Promotion Appliances Auto Expense Bad Debt HQ Assessments Depreciation Dues & Subscriptions Food & Catering License & Permits Insurance Interest Maintenance & Repairs Office Supplies Personnel Postage & Delivery Professional Fees Property Tax Rent School Supplies Taxes Telephone Training Travel Utilities Total Expense Net Income (Loss) Budget Q2 31 Budget Q3 Budget Q4 Budget Year 39 46 45 40 $78,392 $100,333 $118,883 $126,570 $424,178 375 375 375 375 500 79 16,425 534 101 16,425 534 119 16,425 534 126 16,425 534 1,098 1,664 100 1,140 1,772 1,140 1,405 650 1,140 3,750 300 31,433 3,750 300 45,072 3,750 300 46,245 3,750 300 55,405 2,745 14,664 600 1,650 1,275 2,745 14,664 600 1,650 1,275 300 2,745 14,664 600 1,650 1,275 200 2,745 14,664 600 1,650 1,275 3,000 79,068 $(676) 3,000 93,986 $6,347 3,000 94,7…

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