GROUP Assignment Cover Sheet
Student
Course Code: RSM1222 Numbers: 1010850722
Course Title: Management Accounting Please list all
1009728056
student 1008675818
Instructor numbers
Katharine (Kate) Patterson
Name: included in
Assignment this group
Toronto Community Day Care Center Case Analysis
Title: assignment.
Date: March 30, 2025
Code of Behaviour on Academic Matters.
Part 1 A – Revenue vs Cost-Based Funding
If TCDC joins CWELCC and operates at full capacity, determine the expected government revenue under
the two funding models for its childcare program:
Funding under the two plans:
Particulars Amount
($Mn)
Funding under Legacy Plan 4.52
Funding under New Plan 10.76
Legacy plan:
Age-Group Rate Govt Cap Enrolment Days Funding
Infants 78.71 22 38 250 538,745
Toddlers 59.32 22 165 250 1,539,450
Pre-school 53.48 22 310 250 2,439,700
811 4,517,895
New Cost Based Funding:
Employee cost – Variable Program Staffing Cost
Age group Per day Ancillary Total TCDC - Days Students Funding
Toronto GAF
Infants 92.03 12.33 104.36 111.67 250.00 38 1,060,840
Toddlers 56.48 7.57 64.05 68.53 250.00 165 2,826,933
Pre-school 39.23 5.26 44.49 47.60 250.00 310 3,689,070
811 7,576,842
Supervisor Cost – Fixed Program Staffing Cost
Age group Fixed per Ancillar Total TCDC - No of Days Funding
service day y Toronto centers
GAF
Per center 301.38 48.82 350.20 374.72 9 250 843,115
Operational & Ancillary Cost
Age group Per Fixed Total TCDC - Students Days Funding
operating Toronto
space day GAF
Infants 3.80 9.61 13.41 14.35 38.00 250.00 136,313
Toddlers 3.80 9.61 13.41 14.35 165.00 250.00 591,884
Pre-school 3.80 9.61 13.41 14.35 310.00 250.00 1,112,024
1,840,221
Accommodation Costs:
Age group Per license TCDC - Students Funding
per year Toronto
GAF
Infants 1622.91 1736.51 38.00 65,988
Toddlers 974.25 1042.45 165.00 172,004
Pre-school 797.58 853.41 310.00 264,557
502,549
Part 1 B – Risks and Trade-offs
What are the risks and trade-offs associated with moving from a revenue-based funding model to a cost-
based funding model for TCDC?
• Administrative Complexity: The cost-based model requires stringent audits, rigorous
documentation, detailed expense tracking, and annual reconciliations to ensure compliance with
government benchmarks. These processes demand more time from management and finance staff
and increase the risk of delayed funding or claw backs due to procedural errors
• Benchmark Underfunding Risk: Funding is tied to standardized government-set benchmarks that
may not align with actual costs at the center level. If government benchmark costs are too low or
actual expenses exceed the model's coverage, then TCDC risks potential underfunding.
• Reduced Financial Flexibility: The new model may restrict the ability to accumulate surpluses for
capital investments, emergency repairs, or future growth.
• Limited Operational Autonomy: CWELCC participation constrains TCDC’s ability to manage
classrooms, admissions, and program design, adapt quickly to community needs or innovate locally.
• Dependence on Policy Stability: Relying on external government funding increases vulnerability to
policy changes, budget freezes, or delayed disbursements, especially during elections or economic
downturns. If the province alters its formula or pulls back funding, TCDC could face sudden revenue
shocks without the flexibility to recover fees from parents.
Part 2 A – Fixed Cost Allocation
Using the allocation method described above, allocate the total fixed costs across childcare and before
and after school programs based on the operating hours provided.
o Justify the appropriateness of this allocation method.
Allocating fixed costs based on operating hours is a suitable method for day care centers because it
reflects the time-based nature of a hospitality service where human manpower is the primary cost
driver. Since services are measured in hours, this approach ties costs to resource usage—staff time,
facility operation, and utilities—more accurately than other methods. For example, a childcare program
running 8 hours uses more resources than a 2-hour before-and-after-school program, justifying a larger
cost share. It follows the cost causality principle, ensuring each program bears costs proportional to its
operational demand. Plus, operating hours are objective and easy to track, making the allocation fair and
transparent for management.
o Management had also considered using the number of children as an allocation method for fixed
costs. Why might this be a less appropriate approach compared to using operating hours?
Using the number of children as an allocation base is less appropriate than operating hours because
fixed costs like rent, maintenance, and administrative salaries don’t scale directly with headcount—
they’re incurred as long as the center is open. Operating hours better capture the duration and intensity
of resource use; for instance, 10 kids in an 8-hour program consume more staff time and utilities than 15
kids in a 2-hour session, despite the lower headcount. Additionally, headcount can fluctuate daily due to
attendance, leading to inconsistent or unfair cost assignments. In a manpower-driven service, time is a
more reliable driver than numbers, making operating hours a stronger choice for fixed cost allocation.
Allocation of fixed overhead:
Age group #rooms Operatin daily hours Operating Total hours Allocation
g hours days
Infants 4.00 11.50 46.00 250 11,500 10%
Toddlers 11.00 11.50 126.50 250 31,625 27%
Pre-school 13.00 11.50 149.50 250 37,375 31%
Kindergarten 12.00 4.50 54.00 250 13,500 11%
Primary/Junior 22.00 4.50 99.00 250 24,750 21%
118,750
Allocation of Fixed Cost based on Hours:
Fixed portion
Total Total Before/Afte
Expense category Fixed Variable 2024 Cost Childcare
variable fixed r School
Advertising and
100% 0% 37,631 - 37,631 25,509.86 12,121.14
promotion
Amortization of
100% 0% 395,545 - 395,545 268,137.87 127,407.13
tangible
Bad debts
100% 0% 580 - 580 393.18 186.82
(recovery)
Computer services 80% 20% 62,976 12,595 50,381 34,152.88 16,227.92
Equipment leasing 100% 0% 10,220 - 10,220 6,928.08 3,291.92
Fees and dues 100% 0% 35,623 - 35,623 24,148.64 11,474.36
Food 0% 100% 396,578 396,578 - - -
Insurance 100% 0% 55,926 - 55,926 37,911.94 18,014.06
Interest and bank
90% 10% 9,881 988 8,893 6,028.45 2,864.45
charges
Office and
60% 40% 28,536 11,414 17,122 11,606.64 5,514.96
miscellaneous
Personal
30% 70% 9,048 6,334 2,714 1,840.08 874.32
protective equip
Professional fees 100% 0% 286,447 - 286,447 194,180.91 92,266.09
Program supplies 30% 70% 206,629 144,640 61,989 42,021.81 19,966.89
Program
0% 100% 69,941 69,941 - - -
transportation an
Rental 100% 0% 735,432 - 735,432 498,545.48 236,886.52
Repairs and
50% 50% 187,749 93,875 93,875 63,637.03 30,237.47
maintenance
Security system 100% 0% 3,585 - 3,585 2,430.25 1,154.75
Staff development 100% 0% 69,992 - 69,992 47,447.21 22,544.79
Telephone 90% 10% 20,824 2,082 18,742 12,704.83 6,036.77
Utilities 70% 30% 20,047 6,014 14,033 9,512.83 4,520.07
Wages and
25% 75% 9,849,450 793,139.92
benefits 7,387,088 2,462,363 1,669,222.58
12,492,640 8,131,549 4,361,091 2,956,361 1,404,730
Part 2 B – Breakeven Analysis
Given the current enrollment in before and after school programs, what must the variable cost per
student be to achieve break-even at the existing pricing level?
Total Revenues : 2,366,817
Total Fixed Costs: $1,404,730
Revenue per student per day: $32.5
Enrollment: 924
Implied Days: 79 [2366817/(924*32.5)]
Assuming no profit, variable costs would be total revenues minus fixed costs, i.e. $962,086.67
Variable cost per student to achieve break even at current price levels would be $962,086.67/924 i.e.
$1,041.21
Variable cost per student per day would be $1,041.21/79 = $13.17
Part 2C – Assessing the reasonableness of variable cost
Evaluating whether the calculated variable cost per student— $1,041 for the period (or $13.17 per
student per day over ~79 days)—seems reasonable for running a before-and-after-school program, given
operational requirements and key cost drivers like staffing, supplies, and program activities.
Key Operational Requirements and Cost Drivers
1. Staffing (Caretaker Wages)
o Ratio: 1:15 means 924 students require 62 caretakers (924 ÷ 15 = 61.6, rounded up).
o Assuming caretakers work ~6 hours daily (6-9 AM and 3-6 PM), at a daily rate of $20/hour
for 79 days. = $9,480 per caretaker, or $9,480 × 62 = $587,760 total staffing cost.
2. Supplies
• Supplies such snacks, craft materials, cleaning products) are a variable cost tied to enrollment.
For 924 students over 79 days:
o Snacks: $1-$2 per student per day is typical. At $1.50 × 924 × 79 ≈ $109,535.
o Materials: Art supplies, games, etc., might add $0.50-$1 per student per day. At $0.75 ×
924 × 79 ≈ $54,767.
o Total Supplies: ~$164,302.
• This is ~$177.81 per student ($164,302 ÷ 924), or $2.25 per day—reasonable for a basic program
but only a fraction of $1,041 ($13.17/day).
3. Program Activities
• Activities (e.g., sports, tutoring, field trips) vary widely in cost. A modest program might spend
$2-$5 per student per day on enrichment (e.g., equipment, guest instructors). At $3 × 924 × 79 ≈
$219,069, or ~$237.09 per student ($2.81/day), this is plausible but still low compared to
$1,041.
Total Variable Cost Breakdown
• Staffing: $9,480 per caretaker × 62 = $587,760 → $636.10 per student ($8.05/day).
• Supplies: $164,302 → $177.81 per student ($2.25/day).
• Activities: $219,069 → $237.09 per student ($2.81/day).
• Total Estimated: $971,131 → $1051 per student ($13.11/day).
Compare this to the break-even variable cost:
• Calculated: $1,140,260 → $1,041 per student ($13.17/day).
• Gap: $1,051 - $1,041= $10 per student ($0.12/ per day).
Reasonableness Assessment
• Is $13.17 per day reasonable?
The estimated $13.11/day covers basic staffing, supplies, and activities within typical ranges,
leaving negligible gap. Therefore, the breakeven variable cost seems reasonable.
Part 2D: Ways to optimize staffing efficiency?
Staffing efficiency can be optimized within the 1:15 ratio while keeping program quality intact by
maximizing caretaker utilization and aligning resources with demand:
• Support Staff: Use lower-cost aides or volunteers for non-supervisory tasks (e.g., snack prep,
activity setup), letting caretakers focus on direct supervision. This maintains the 1:15 ratio for
safety while cutting labor costs.
• Activity-Based Staffing: During low-supervision activities (e.g., movie time), caretakers might
oversee slightly more students temporarily (if permitted), reverting to 1:15 for high-supervision
tasks (e.g., outdoor play), balancing efficiency and quality.
• Attendance Forecasting: Use data to predict daily attendance, deploying only the needed 1:15
staff (e.g., 50 caretakers for 750 students on a low day) while ensuring quality through consistent
care standards.
Part 3 A- In-House vs Outsourcing toy cleaning
3a. Is the proposal to outsource sanitation financially feasible for location #3?
In-House TCDC - Sanitation Costs
Item Cost type Cost Periods Cost per year Notes
25% of $40,000
Personnel Variable $ 10,000.00 1 $ 10,000.00
annual staff salary
Repairs &
Fixed $ 2,000.00 1 $ 2,000.00
maintenance Annual fixed cost
$0.056/toy, 120
toys/day, 250
Cleaning solution Variable $ 0.056 250 $ 1,680.00
operating days/
year
Total Yearly Cost $ 13,680.00
Outsourced Pure Guard Solutions (PGS) - Sanitation Costs
Item Cost type Cost Periods Cost per year Notes
Shipment Fixed $ 2,000.00 12 $ 24,000.00 $2,000/month fixed cost
$0.25/toy, 120 toys/day, 250
Sanitation Variable $ 0.25 250 $ 7,500.00
operating days
Sale of $0.056/toy, 120 toys/day,
One time -$ 20,000.000 1 -$ 20,000.00
Equipment 250 operating days/ year
Total Yearly Cost - Year 1 $ 11,500.00
Total Yearly Cost - After Year 1 $ 31,500.00
Employee
Qualitative - - - Likely negative effect
retention
Staff morale Qualitative - - - Likely negative effect
Job
Qualitative - - - Likely negative effect
satisfaction
Comparing the two, the in-house method costs roughly $13,680 annually versus $31,500. Even if the
equipment sale provides a one-off offset, the recurring annual costs under outsourcing are significantly
higher (an additional $17,820 year). Thus, from a strictly financial perspective, the outsourcing proposal
is not feasible for Location #3. In addition, the choice to outsource sanitation may also incur qualitative
costs, such as a reduction in employee morale, retention and job satisfaction. Taking these into account,
the option to outsource has the possibility to be even more costly than determined quantitatively.
PART 3B - Point of Indifference
3b. What is the point of indifference at which both options (in-house vs. outsourcing) result in the same total
cost?
In-House TCDC - Sanitation Costs
Item Cost type Cost/Toy/Year Total Cost/year Notes
Personnel Variable $ 83.33 $83.33(T) $10,000/120 Toys = Cost/Toy/Year
Repairs & Annual fixed cost
maintenance Fixed - $2,000
$0.056/toy/day * 250 operating
Cleaning solution Variable $ 14.000 $14(T) days/ year
Outsourced Pure Guard Solutions (PGS) - Sanitation Costs
Item Cost type Cost/Toy/Year Total Cost/year Notes
Shipment Fixed - $ 24,000.00 $2,000/month fixed cost
$0.25/toy, 120 toys/day, 250
Sanitation Variable $ 62.50 $62.50(T)
operating days
Point of indifference 632 Toys
Point of indifference: in-House costs = Outsourced Costs
2,000+83.33T+14T = 24,000+62.50T
T = 631.58 ~ 632 Toys
Therefore, the point of indifference, where the yearly costs of using in-house sanitation vs outsourcing
sanitation are equal to each other occurs when the location has 632 toys to be sanitized daily. This
calculation assumes that the labor cost for the in-house solution costs $10,000/120 toys, and this cost is
constant even if more than one employee is required - (i.e., if the cost goes above $40,000, then it can
be distributed amongst more than one employee at the same rate.
Thus, large centers with more than 632 toys will benefit more from outsourcing - However, it is
important to note that when accounting for the qualitative costs, the point of indifference may be larger
than 632 toys.
Since the value of outsourcing is dependent on the size and needs of the location, TCDC should apply the
outsourcing strategy on a center-by-center basis.
3c. Potential logistical challenges of shipping & contingency plans to consider
Logistical challenges: Details
Daily pick-up and return of toys must be precisely scheduled. Delays can disrupt the cleaning
Timeliness &
schedule, potentially leaving toys unavailable when needed. Given TCDC’s tight daily operating
Coordination
window, any lapse risks compromising the safety standards that parents expect.
Handling & Damage Repeated shipping increases the risk of physical damage or loss of toys. Each transit step—from
risks packing at TCDC to delivery at the vendor and back—adds potential for wear and tear, which
could lead to increased repair or replacement costs and even affect the quality of the
sanitization process.
Managing the logistics of daily shipments requires robust communication between TCDC staff
and the vendor. This additional administrative layer can strain resources, especially when the
Administrative Burden
staff are already dealing with broader operational challenges and high turnover in the childcare
industry.
Any variation in the vendor’s service; such as inconsistent pick-up times or fluctuating quality
Consistency &
control, could have a cascading effect on daily operations. For a center that relies on strict
reliability
adherence to health and safety protocols, this is a significant risk.
Contingency Plans: Details
Service Level Establish clear SLAs with the outsourcing provider that specify strict turnaround times, quality
Agreements standards, and penalties for delays. These contractual safeguards ensure that the vendor is
(SLA's) accountable for any disruptions.
Maintain a reserve stock of sanitized toys to cover unexpected delays or service disruptions.
Backup inventory and
This buffer inventory can serve as a stop-gap measure, ensuring that operations are not halted
On-site Buffer
even if the shipment schedule is disrupted.
Develop relationships with a secondary vendor who can quickly take over if the primary
Alternate Vendor
provider fails to meet expectations. This dual-sourcing strategy minimizes the risk of a single
Agreements
point of failure.
Implement a tracking system or demand one from the provider to monitor the status of
shipments in real time. This technology would allow TCDC to anticipate delays and adjust
Tracking systems
schedules accordingly, ensuring that any issues are promptly addressed. Depending on the cost
of implementation, this strategy can help mitigate some risks.
3d. Qualitative factors influencing TCDC's decision Outsourcing toy sanitization
introduces significant qualitative risks that could undermine TCDC’s commitment to high-quality
childcare. Relying on an external provider might compromise the consistent, Health-Canada-approved
cleaning standards that parents trust, potentially damaging the center’s community-focused brand and
reputation. In-house operations allow TCDC to maintain direct oversight and quickly address any issues,
preserving the flexibility essential for a dynamic childcare environment. Additionally, outsourcing could
negatively affect employee morale and job security; staff may feel undervalued or threatened by a
diminished role, leading to decreased job satisfaction and higher turnover in a sector already challenged
by retention issues. Moreover, TCDC’s identity is built on personal accountability and hands-on care, and
shifting these core functions externally may be perceived as cost-cutting at the expense of service
quality. Overall, the potential loss of operational control, the risks of logistical delays and quality
inconsistencies, and the adverse impact on staff morale and retention strongly argue in favor of
continuing in-house sanitization.
Part 4 – Overall Conclusion
To: All TCDC Parents and Guardians
From: TCDC Board of Directors and Management
Subject: Update regarding TCDC’s Participation in the CWELCC Program
Date: 30th March 2025
Dear TCDC Families,
We are delighted to announce that the TCDC has decided to join the Canada-Wide Early Learning and
Child Care (CWELCC) program effective starting January 2025. This means that fees for children under six
will be significantly reduced, while we continue to offer the same high-quality programming and care
that your family depends on. This decision reflects our commitment to making childcare more affordable
while ensuring sustainability.
About CWELCC and Rationale for Joining
CWELCC is a federal-provincial initiative designed to reduce childcare costs to an average of $10 per day
by 2026, all while maintaining quality service. Beginning in 2025, the program will provide cost-based
government funding to help cover critical operating expenses such as staff wages, facility costs, and
program materials.
After thoroughly evaluating both the legacy and new funding models, we concluded that the new cost-
based model will offer TCDC significantly more financial support. This funding will help us stabilize
operations, support our staff, and reduce fees for families.
By participating in CWELCC, we can:
• Reduce childcare fees for children under six, with a long-term goal of reaching $10/day.
• Secure sustainable, predictable funding from all levels of government. Preliminary estimates show
that TCDC’s total funding under the new model could be considerably higher than the older,
revenue-based approach, helping us cover rising wages, occupancy costs, and program materials.
• Provide better wages and training opportunities for our Early Childhood Educators (ECEs) which will
support the high level of care our community has come to expect.
• Uphold our nonprofit mission to deliver accessible care to our community.
What This Means for You and Your Child (Impact on Fees and Services)
Here is what you can expect as we transition into CWELCC:
• Lower Parent Fees
o Daily fees for infants, toddlers, and preschoolers will be capped at $22/day starting in 2025, with
the long-term goal of $10/day by 2026.
o Fees for school-aged children in our before- and after-school programs will remain unchanged,
as these are not part of CWELCC.
• Program Continuity
o All current programs, including full-day care and before/after school services, will continue
without interruption.
o Staffing ratios, classroom structures, and learning experiences will maintain our high standards.
• High-Quality Care
o CWELCC funding is linked to program quality standards, so we will continue to meet and exceed
provincial requirements for safety, learning, and hygiene.
o Participation allows us to invest more in staff development, materials, and inclusive
programming.
Addressing Your Concerns and Reaffirming Our Commitment
We understand that changes can bring questions. Here’s what we want you to know:
• Waitlists and Capacity: With high demand for CWELCC-covered spaces across Ontario, TCDC is
currently operating at full licensed capacity and will continue to do so. We will manage enrollment
fairly and transparently.
• Financial Sustainability: While CWELCC limits the creation of substantial financial surpluses, our
careful planning ensures continued stability through responsible budgeting and oversight.
• Staffing and Quality of Care: We remain committed to providing a safe, enriching environment
staffed by qualified Early Childhood Educators (ECEs). Additionally, we recognize the value our
educators and will use government funding to support their recruitment, retention, and training. Our
management team is actively working on strategies to address industry-wide staffing challenges.
Your children’s well-being is our highest priority.
Above all, we are committed to providing a safe, enriching, and inclusive childcare environment that
reflects the trust you have placed in us for over three decades.
Join Us for More Information
We invite you to attend our Parent Information Session on April 15th, 2025, to learn more, ask questions,
and share your feedback. In the meantime, if you have any immediate concerns or would like to discuss
your family’s specific needs, please reach out to our administration office.
Thank you for your continued trust in the Toronto Community Day Care Center. We truly value our
partnership with you and look forward to serving your family under the new CWELCC framework.
Sincerely,
The TCDC Board of Directors and Management
