- Identify the services or programs to be included in the cost and profitability analysis.
- Examine the costs listed in Table 2.
a. Identify the direct costs associated with each service or program.
b. Which costs would be organization-sustaining costs? Provide an argument for or against assigning these costs to services or programs. - Identify the broad activity categories and create cost pools by assigning the costs from Table 2 to the pools.
- Identify the cost drivers that have a causal relationship to the activity cost pools created in Question 3.
- Calculate the activity or cost-driver rates for each cost pool. Note: You should develop rates that will allocate costs to ACDC programs and/or tenants only. You should not allocate any costs back to general administration.
- Using the services or programs identified in Question 1, determine service or program revenues, assign the costs to the service or programs, and calculate service or program profitability. A spreadsheet may be helpful with this task.
- Based upon your calculations in Question 6, which services or programs are operating successfully? What appears to be the determining factor in whether the service or program is profitable?
- Discuss at least three alternatives for improving the overall profitability of the daycare facility.
Sample Solution
