Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. Thebusiness had $140,000 of net income in 2015, when 50 students were enrolled and data forvariable costs per child and total fixed costs were as follows:Cost Schedule:Variable Costs: Lunch & snacks $1,000Education Supplies 750Other supplies (toiletries etc.) 250$2,000Fixed Costs: Rent $20,000Utilities 3,000Insurance 3,000Salaries 30,000Miscellaneous 4,000$60,000Required:d) Calculate the margin of safety in number of children and sales dollars.e) Given the expected enrolment of 50 children, prepare a contribution margin incomestatement for the year ended December 31, 2015, detailing the components of totalfixed costs, and clearly showing contribution and operating income.f) Assuming that normal enrollment at the Daycare Centre is 50 children; construct abreak-even chart, clearly showing the break-even point in units and sales dollars andthe margin of safety in units and in sales dollars.g) Assume that Tiny Tots target operating income is $156,000 per month. Calculate thenumber of children that must be enrolled for this goal to be realized. Is this a realisticgoal?h) Tiny Tots lost its lease and had to move to another building. Monthly rental for thenew building is $28,000. At the suggestion of the parents, Tiny Tots plans to take thechildren on outings. Monthly cost for the outing is $10,000. By how much should TinyTots increase monthly fees to meet the target operating income of $156,000 permonth, assuming the expected enrolment of 50 children?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The
business had $140,000 of net income in 2015, when 50 students were enrolled and data for
variable costs per child and total fixed costs were as follows:
Cost Schedule:
Variable Costs: Lunch & snacks $1,000
Education Supplies 750
Other supplies (toiletries etc.) 250
$2,000
Fixed Costs: Rent $20,000
Utilities 3,000
Insurance 3,000
Salaries 30,000
Miscellaneous 4,000
$60,000
Required:
d) Calculate the margin of safety in number of children and sales dollars.
e) Given the expected enrolment of 50 children, prepare a contribution margin income
statement for the year ended December 31, 2015, detailing the components of total
fixed costs, and clearly showing contribution and operating income.
f) Assuming that normal enrollment at the Daycare Centre is 50 children; construct a
break-even chart, clearly showing the break-even point in units and sales dollars and
the margin of safety in units and in sales dollars.
g) Assume that Tiny Tots target operating income is $156,000 per month. Calculate the
number of children that must be enrolled for this goal to be realized. Is this a realistic
goal?
h) Tiny Tots lost its lease and had to move to another building. Monthly rental for the
new building is $28,000. At the suggestion of the parents, Tiny Tots plans to take the
children on outings. Monthly cost for the outing is $10,000. By how much should Tiny
Tots increase monthly fees to meet the target operating income of $156,000 per
month, assuming the expected enrolment of 50 children?
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