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ACCTBA3 GROUP BUSINESS CASE (5% of class standing grade)

3 rd Term, Academic Year 2014-2015

MARIAN LEARNING CENTER

Marian Learning Center is a day-care center/preschool which operates as a partnership of Linda Rivera and Betina Domingo. The center is in a city that has a large base of two-income families who have a need for quality day care. The two women started the center this year. Domingo contributed P40,000 to get the business started to purchase equipment and to operate through the early months. Rivera, who previously managed another center, is the director of the center and draws P2,000 per month for her services. Partnership profits and losses, after Rivera’s salary, are split 75 percent for Domingo and 25 percent for Rivera.

Marian Learning operates from 6 a.m. to 6 p.m., Monday through Friday, is in a single building, which has a capacity limit of 120 children, and meets city and state regulations. At present, the center has six classes, all at maximum sizes, structured as follows:

 

Number of

Children per

 

Monthly Tuition Per Child

Age

Classes

Class

Total Children

2 to 3

 

2 10

20

P320

3 to 4

 

1 15

15

P280

4 to 5

 

1 15

15

P280

5 to 6

 

2 15

30

P260

Class sizes are determined by Department of Education which sets a limit on the number of children per instructor. The center uses one instructor per classroom.

Tuition is charged monthly. Minor adjustments are made on an individual basis. In October, the most recent month with data available, revenues were P21,500 (P22,600 less P1,000 adjustments). Monthly revenues should be rather stable since classes are full most of the time. Expenses for October were:

Salaries for instructors Salary of director Salary of part-time cook Food expenses Staff benefits expenses Supplies expenses Occupancy and other administrative expenses Total expenses

 

P9,600

P2,000

 

900

2,200

 

2,450

600

3,250

P21,000

Fixed expenses are the salary of the part-time cook and occupancy and other administrative expenses. The salary of the director is fixed; but, as a partnership, this is in reality a distribution of profits but is included in expenses for comparative purposes.

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Food is P1.25 per student per day. Staff benefits are 10 percent of salaries plus P200 per person for benefit programs for instructors averaging P1,600 per instructor per class.

Rivera wants to increase the quality of service by decreasing class sizes and also expanding student enrollments. These alternatives are interrelated. Rivera thinks that class sizes are too large and that children are not getting the individual attention they require. Rivera surveyed parents of all 80 students to measure their support for a tuition increase tied to a reduction in class size. For children ages 2 to 5, most parents would support a 25 percent tuition increase, and nearly 50 percent would support a 50 percent increase. Of the 5-to-6 age group parents, nearly three-fourths did not want any increase. The remainder said they would support a 25 percent increase but no more.

Proper class size is very subjective. However, Rivera feels that she could achieve a child/instructor ratio of 6 to 1 for the 2-to-3 age group; an 8 to 1 ratio for the 3-to-4 and 4-to-5 age groups; and a 10 to 1 ratio for the 5-to-6 age group.

The center has easily maintained the 80 student level, with each class full. Rivera keeps in touch with waiting-list parents to make certain each is still interested. This list provides children when someone leaves the center. The current waiting list is as follows:

Age Group

Number of Children

Age Group

Number of Children

2 to 3

5

4 to 5

4

3 to 4

7

5 to 6

11

Rivera does not start a new class unless more students are on the waiting list than are required per class. Obviously, enough students are on the 5-to-6 age group waiting list to start a new class. Lately, however, she has wondered if the center could make a profit by starting classes with fewer than the requisite number, taking the chance that new students would appear and could be added immediately.

Information from her various inquiries imply that a potential market for quality infant care (0 to 24 months) exists. Rivera doesn’t think this expansion would be profitable. However, she has never done an analysis of the situation and has not thought about an appropriate tuition. She believes that the infant/instructor ration in her center should be no higher than 5 infants to one instructor. The center would have no food costs for the infants.

Domingo will only agree to Rivera’s suggested changes if the center will continue to operate at or above the current profit level.

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INSTRUCTIONS

1. Look at each decision separately, as incremental to the current situation, and evaluate the marginal profit:

a. If class size is decreased (keeping the same 80 students), what increase in tuition is necessary to keep the current monthly profit level?

b. Without regard to (a), is it profitable to create the new class from the waiting list? Explain.

c. Use the new fee structure as found in (a). Is it profitable to move to smaller class sizes, if new full classes are created and filled to their new maximum using the waiting list? Show calculations.

d. Is a class for infant care profitable if tuition is the same as the proposed class tuition for the 2-to-3 age group?

2. Write a brief memo to Rivera and Domingo highlighting any concerns that underlie the analyses you have performed in Part 1. Use the following points to guide you in drafting your memo:

a. After evaluating the four alternatives in Part 1, which would be the best alternative that you would recommend to Rivera and Domingo assuming that the parents would be willing to pay the proposed tuition fees?

b. Discuss the qualitative considerations involved in the following problem areas:

i.

Tuition

ii.

Waiting list

iii.

Infant care

iv.

Teacher availability

v.

Other cost behaviors

c. Do you think that the assumptions are heavily based on class size and cost patterns? Why or why not? If so, what would you recommend to Rivera and Domingo to minimize the risk of the changes of the key assumptions used in the analysis.

3. What would you suggest to improve the overall operations of the learning center? Cite some strategies/management approaches that could be useful to contribute to the center’s improvement.

4. Based on your recommendations, prepare a projected income statement that could be used by the management in its decision-making for the succeeding school year’s operations.

FORMAT

1.

Outline:

I.

INTRODUCTION

II. DISCUSSION:

(This is the bulk of the paper.

Be sure to include answers to guide questions and

support your answers with computations and logical ANALYSIS.)

III.CONCLUSION/RECOMMENDATION

IV. REFERENCES: (if any)

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2.

Format of Written Report:

a) Paper size: 8.5” x 11”

b) Margin: 1” on all sides

c) Font and Font size: Tahoma 11

d) Paragraph alignment: Justified

e) Paragraph spacing: 1.5

f) Length of written report: 5 to 10 pages, EXCLUDING cover page and attachments

g) Attachments: Include the copy of the business case and other attachments at the end of your report.

h) Insert the entire report in a short sliding folder.

i) The cover page should be as follows:

NAME OF THE COMPANY

A Group Business Case Presented to the Accountancy Department De La Salle University

In partial fulfillment Of the course requirements In ACTMANA / ACCTBA3

SUBMITTED TO:

(Name of Faculty)

SUBMITTED BY:

Surname, Given Name, M.I.* Surname, Given Name, M.I. Surname, Given Name, M.I. Surname, Given Name, M.I.

Date

*NOTE: The names should be arranged alphabetically.

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3.

Deadline of Written Report:

MW class April 21, 2015 (5pm)

TH class April 21, 2015 (5pm)

Kindly submit the group business case at the Accountancy Department and have Miss MJ, the secretary, affix her signature and submission time on the front cover of the business case.

4. Rubric/Criteria for Grading:

a) To compute for the 5% team grade, please refer to next page for the rubric.

b) To compute for the individual written group business case analysis grade, the average peer evaluation grade (refer to Item#7) will be multiplied to the team grade. A sample computation follows:

Application of ACTMANA-related tools 100% * weight of 50% = 50.00%

Depth of insights

90%

* weight of 30% = 27.00%

Quality in writing paper

90%

* weight of 20% = 18.00%

Team grade Multiplied by: Average peer evaluation grade (Assume 2 exemplary, 1 satisfactory or 290%/3) INDIVIDUAL GRADE Multiplied by: Business case grade INDIVIDUAL BUSINESS CASE GRADE

= 95.00%

96.67%

91.83%

5%

4.59%

CRITERIA

EXEMPLARY

SATISFACTORY

DEVELOPING

BEGINNING

100%

90%

80%

70%

Application

The group applies at least two ACTMANA-related tools and skills appropriately and includes only realistic assumptions in the paper.

The group applies two ACTMANA - related tools and skills appropriately and includes a few unrealistic assumptions in the paper.

The group applies only one ACTMANA - related tool and skill appropriately and includes some unrealistic assumptions in the paper.

The group fails to apply at least one ACTMANA - related tool and skill appropriately and includes many unrealistic assumptions in the paper.

of

ACTMANA-

related

tools and

skills

[50%]

Depth of

The group relates properly the case to the learnings in ACTMANA course and shows comprehensive knowledge on ACTMANA topics.

The group relates properly the case to the learnings in ACTMANA course and shows some knowledge on ACTMANA topics.

The group relates somewhat improperly the case to the learnings in ACTMANA course and shows little knowledge on ACTMANA topics.

The group fails to relate properly the case to the learnings in ACTMANA course and shows little to no knowledge on ACTMANA topics.

insights

and

discussions

[30%]

Quality in

The group follows the format and has not one spelling/

The group follows the format and uses only the English language in the paper which is at an acceptable level.

The group follows the format but uses a mixture of Filipino and English language in the paper and/or uses the English language somewhat inappropriately.

The group does not follow format and uses a mixture of Filipino and English language in the paper and/or uses the English language inappropriately.

writing the

paper

(format,

grammar)

 

[20%]

grammatical error in the paper.

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5.

Peer Evaluation

a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates (in alphabetical order).

b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer to table below. Be fair when evaluating.

c) Print your name then sign as evaluator.

d) Include this as an attachment at the end of the paper.

CRITERIA

EXEMPLARY

SATISFACTORY

DEVELOPING

BEGINNING

100%

90%

80%

70%

Contribution

The student contributes to the team’s final output more than what is expected.

The student contributes to the team’s final output as expected.

The student contributes somewhat to the team’s final output.

The student does not contribute to the team’s final output.

to team’s

final output

[100%]

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