Sunnydays Nursery 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 |8 children who stay all day and are served a hot lunch. Currently, monthly tuition is $60 for half-day children and $120 for all-day chil- dren. The school has a long waiting list of children whose parents want to enroll them for half-days.

All-day children have never been accepted at the school unless their parents qualify for aid under the state’s day-care program. Under this program the state pays half of the monthly tuition up to a maximum of $100. New regulations that take effect on January | would require accreditation before state funds can be paid under this program.This would require that at least one teacher be certified by the state for teaching at the preschool level. Currently, none of the school’s three teachers can qualify for certification.

The director of the school feels that the loss of state 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 tuition could be raised to $75 for half-day children and $150 for all-day children. The director is uncertain how this would affect enrollment, however. Alterna- tively, the school could give up the all-day children who currently receive aid. Several other day-care centers in town (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:

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Required: (1) What problem does the director have to solve?

(2) 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.

(3) Assume that the director has reviewed all possible choices and has reduced the decision to two possible alternatives:

(a) to close the all-day program, not to raise tuition, and not to hire the new teacher; and

(b) 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.
(4) 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. TYK-1