The Little Beaver Daycare Centres, a not-for-profi t organization, provides daycare services to low-income families in 20

Question:

The Little Beaver Daycare Centres, a not-for-profi t organization, provides daycare services to low-income families in 20 communities in Alberta. The manager's summary report for the past four months of operations is reproduced here:

The daycare receives an operating subsidy from the province, but unfortunately, the operating loss that has been incurred through June $(79,392) is larger than anticipated. Part of the problem is the salary increase that went into effect in June, which had been overlooked when the budget was submitted to the city last year. To
Compound the problem, the warm summer months traditionally bring with them an increase in additional summer outdoor activities. Thus, the daycare experiences additional costs during July.
The daycare's managers are considering an increase in daycare fees to reduce losses. However, they are reluctant to raise fees because the children are from low-income families. The daycare will raise fees only if necessary.
REQUIRED INFORMATION ANALYSIS
The following questions will help you analyze the information for this problem. Do not turn in your answers to these questions unless your professor asks you to do so.
A. Use your judgment to classify costs as fi xed, variable, or mixed. Explain how you classifi ed each item.
B. Create a cost function for the Little Beaver Daycare Centres. Use the high-low method to estimate the function for any mixed costs.
C. Use the cost function to estimate July expenses based on a projection of 940 children.
D. List as many reasons as you can why management of the Little Beaver Daycare Centres cannot know with certainty what the expenses will be during July.
E. Describe the pros and cons of using your cost estimate from Part (C) to decide whether to raise daycare fees.
REQUIRED WRITTEN ASSIGNMENT
The managers need your July cost estimate to help them decide whether to raise daycare fees. Turn in your answer to the following.
F. Use the information you learned from the preceding analyses to write a memo to the director of the Little Beaver Daycare Centres, presenting your estimate of July costs. Provide the director with appropriate information for understanding your methodology and evaluating the reliability of your cost estimate.