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You are a budget analyst in the Nirvana budget office. Mayor Spark asked you to run some numbers so she can take a look at what was just negotiated between Ms. Lux, Mr. Legado, and Ms. Nemet.

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You are a budget analyst in the Nirvana budget office. Mayor Spark asked you to “run some numbers” so she can take a look at what was just negotiated between Ms. Lux, Mr. Legado, and Ms. Nemet. You should prepare the budget in a speadsheet. In the end, this is to result in a memorandum prepared for Mayor Spark (no more than two single-spaced pages) that will include the following information: 1. A baseline 2014 budget for the day care center (assume a calendar year). This should include the total surplus or deficit for each month. Please use the template that I have provided on th...

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Question Preview:

You are a budget analyst in the Nirvana budget office. Mayor Spark asked you to “run some numbers” so she can take a look at what was just negotiated between Ms. Lux, Mr. Legado, and Ms. Nemet. You should prepare the budget in a speadsheet. In the end, this is to result in a memorandum prepared for Mayor Spark (no more than two single-spaced pages) that will include the following information: 1. A baseline 2014 budget for the day care center (assume a calendar year). This should include the total surplus or deficit for each month. Please use the template that I have provided on the next page to display your results. 2. A short examination of the nature of the costs in the day care center. Which are variable, fixed, and step costs? What are the costs on a per child basis? What would you say are the primary cost drivers? Try graphing costs (and potentially revenues) over time. 3. An analysis of how this baseline budget would change if the child/staff ratio was changed to the maximum allowed by law. 4. A discussion of how the baseline budget would change if the enrollment increase was 10% per month from Feb. through May and 0% for June through Dec. 5. If you calculate that the center is in a deficit situation, what changes can be made to balance the budget? 6. Whether or not you may have considered the option of higher fees to parents under #5 (above), estimate what monthly fee would need to be charged to parents in order for the center to break even under the baseline budget.

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Nirvana, a medium-sized city in the midwestern part of the United States, has experienced a significant change in the municipal work force of 1800 employees. Many more employees are responsible for caring for children than in the past. In a recent survey of city employees, over forty percent of employees said that “affordable day care for children” was important to them. Meanwhile, the Director of the Office of Personnel, Mary Lux, has become convinced that the lack of affordable day care is one of the main reasons for absenteeism and lateness among city employees. Mayor Petula Spark, some of the members of the city council and the leader of the major city employees’ union (Denardo Legado) have all agreed that something should be done. The question is—what would it be?
Mayor Spark was in favor of doing something as long as it did not result in a major expense for the city’s already strained budget. She told Legado, who was negotiating for day care on behalf of the city employees: “We’ll give you space and utilities for a year at no cost. It is up to you to come up with a suitable day care center that conforms to state and federal law.” The only state and federal requirements specific to day care centers are that they a) need to be licensed and inspected once a year (the cost of annual inspection is $100); b) that all new day care workers take part in a three-day state-certified training program (training costs are $400 per employee); and c) that the child to day care giver ratio for no greater than 8 to 1.

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