Sunnydays Pre-school has been in operation for about five years. The school has never had any trouble filling its limit: 36 children for the morning session, 36 different children for the afternoon session, and 18 children who stay all day and are served a hot lunch. Monthly fees are \(\$ 60\) for half-day children and \(\$ 120\) for all-day children. The school has a long waiting list of children whose parents want to enrol them for half-days.

All-day children are accepted at the pre-school if their parents qualify for assistance under the federal day-care program. Under this program, the federal government pays half of the monthly tuition up to a maximum of \(\$ 100\). New regulations taking effect on 1 January would require accreditation before federal funds can be paid under this program. This would require that at least one teacher be certified by the state for teaching at the pre-school level. Currently none of the pre-school's three teachers qualifies for certification.

The director of the school feels that the loss of federal funds would pose a serious threat to the school. She believes that a certified teacher could be hired, although this would cost the school \(\$ 900\) per month.

Monthly fees could be raised to \(\$ 75\) for half-day children and \(\$ 150\) for all-day children. The director is uncertain how this would affect enrolment, however. Alternatively, the school could give up the all-day children who currently receive funding. Several other local pre-school centres (some charging as little as \(\$ 100\) per month) have room to take all of the all-day children.

Monthly operating costs for the school are as follows:

Toys and supplies are variable at rates of \(\$ 5\) per half-day child per month and \(\$ 10\) per all-day child per month.
Required:
a What problem does the director have to solve?
b Suppose the director has placed you on an advisory committee to make a recommendation about a solution to the problem. With your committee, make a list of possible alternatives that she could consider.
c Assume the director has reviewed all possible choices and has reduced the decision to two possible alternatives: (i) to close the all-day program, not to raise tuition and not to hire the new teacher; and (ii) to keep the all-day program open, to raise tuition and to hire the new teacher. List the costs and revenues that you think will be relevant in the analysis of these two alternatives and give a reason for including each on the list.
d With your committee, make a list of other information you would like to have before advising the director on which of the two alternatives she should choose.

Transcribed Image Text:

Rent Utilities Salaries Insurance Toys and supplies Lunches Total Monthly Cost $ 300 160 2400 100 360 378 $3698