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Case Assignment 6
University Day Care Centre

Group Members
Abhimanyu Balaguru
Aftab Manzoor AA
Agila S
Amit Singh Tolia
Anirudh G


Anirudh Murali


1. While there are several reasons behind while financial problems persist
at UDC, the most prominent in our opinion is the sliding fee range which is
in place at the moment. It is the main reason why UDC is not able to be
able to budget for their future revenues. This leads to the variance
between the budgeted and actual revenues.
There are several reasons why the actual results vary from the budgeted
ones. Firstly, the expenses arent classified correctly which can be seen
from the fact that one time expenses like toys and linen were grouped
together with operating expenses like disposable diapers and snack foods.
This leads to confusion regarding what is the reason behind why expenses
might be high since the organization wouldnt have any idea on whether it
is due to one off expenses or the operating expenses. It also makes the
organization unable to focus and reduce expenses.
Secondly, the tuition contribution forecasts didnt really match with the
actual tuition contributions even though the enrollment was more than
50% in each of the categories. It is further indicated by the fact that, even
if the enrollment was at full capacity in all of the courses the variance
between the actual and budgeted would be nearly $67,000. With a
budgeted revenue of $329,194 and expenses of $489,194, a difference of
$67,000 in the tuition fee is really high since it is 20% of the total
budgeted revenue. It completely throws off the entire budget off course.
Thirdly, considering the fact that the number of enrolled students isnt at
full capacity it is a mistake to employ more people than required currently.
This overstaffing has led to costs overrun since the expenses havent
really reduced in a proportionate manner as compared to the revenues.
Fourthly, several costs werent recorded yet since the invoices especially
for classroom items hadnt been received yet which would lead to large
variance between the actual and budgeted expenses. Furthermore, the
services which were provided by the University was only provided in 2-3
months, it lead to several problems since it wouldnt be easy to forecast
the expenses.
Fifthly, the part time enrolled children vis--vis the full time enrolled
children also led to a difference between the expected revenues and the
actual revenues.
All of these reasons are why the University Day Center having financial

2. Ms. Brooks needs to several tough decisions in order to improve UDCs

financial woes. From an operating point of view, she needs to draw upon
the knowledge of expenses which have been undertaken during the first
year and segregate them better. This would also help them to prepare a
more accurate budget compared to the budget for the first year.
She should also decide whether or not to keep full-time enrollees vis--vis
the part time enrolled applicants. It would be better to keep the full time
enrollees instead of having both since it would be easier to forecast the
revenues better.
She also needs to find out different vendors who could deliver supplies at
a cheaper state to reduce her operating expenses which would help her
greatly in improving the financial performance.
From an admission point of view, she should either decide to reduce the
capacity of the UDC in order to focus more on breaking even or even
profitability. The other choice she has is to allow applicants from outside
the university to enter the UDC. Since they are two completely different
strategies she needs to figure out which one would be more profitable.
Although in our opinion, it would be better to allow outside applicants to
apply since she has already hired almost all the required staff which would
allow the UDC to work at full capacity.
She should also lobby the University to remove the sliding fee scale since
it is flawed and it leads to a huge variance between the expected and
actual revenues. It would allow her to standardize the revenues generated
from the applicants.

3. The trustees need to first decide whether they are running the UDC as a
commercial venture or out of a sense of concern towards their employees.
In case they are running it in a commercial sense, then they should
abolish the sliding fee structure and have a common fee for all applicants
which should be calculated keeping in mind the total overall costs in
running the day center.
On the other hand, if the trustees are running it out of a sense of concern
then they should not provide a subsidy which is dependent on the Day
Centers on achieving revenue and collection targets.
In our humble opinion we would advise the trustees to not run the UDC as
a commercial venture and rather run it like an additional perk towards the
employees. By not asking for UDC while providing a subsidy will
encourage the UDC employees and provide them some time to improve
the enrollment of the UDC. In case after a year or two, the enrollment
doesnt reach full capacity they can consider offering a certain percentage
of the seats available to outside applicants.

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