The Analysis Of The Daycare Center’s Operations Budget


This memo concerns the analysis of the Daycare Center’s operations budget for the year 2000. An Exhibit A from the Northville Daycare Center Case Study shows the prospective expenditures that this daycare center will have in the first year of its operations. One of the most crucial aspects of management accounting is budgeting. Its primary functions include the creation of preliminary budgets, operational deviation identification, factor analysis of the outcomes, and the search for the best management decision possibilities. Comparison of the actual outcomes to the anticipated ones, along with the determination of the reasons behind variances in natural, absolute, and relative values, constitutes the analysis of the budget execution for the company. A business that wishes to flourish in the marketplace, especially in unstable economic times, should pay close attention to the study of budget execution. This is because it reveals a lot of management issues, helps tighten control over spending, and identifies people in charge of the activity’s outcomes. This paper will analyze the budget projections of Northville Daycare.

There are two stages of financial planning, budget planning and consolidated budget planning (“Budget analysis,” n.d.; Wayne, 2022; USAID, n.d.). The positive aspect of the budget for this daycare center is that Tiny Tods will provide administration services, meaning that no additional fees for this work will be provided. Considering the city’s strained budget, this is a good factor.

Based on the daycare worker-per-child ratio, there should be 20 employees directly involved in childcare for this center. This is because the city expects 120 children to be enrolled in the first year. However, one should also consider the monthly growth of the number of children enrolled, which is 10% per month in the first 4 months and 5% from there on in the future. Some of the important considerations for the budget are the number of children that can be enrolled in the daycare within the year 2000 of the operations. There are 1800 employees in Northville, and 35% of them are female, which means that 630 employees can potentially need childcare services. The administrative costs associated with the operations are the salaries of Ms. Perfekt and Ms. Nemet, which are $1300 and $2400, respectively. In total, in 2000, the daycare will have to pay $55386. The details are provided in Exhibit 1 below.

Exhibit 1. Daycare budget 

Salary Social security Unemployment and disability benefits Pension fund Health benefits
Ms. Nemet 28800 2160 2304 1728 720
Ms. Perfekt 15600 1170 1248 936 720
total 55386
Operational costs
Snack + lunch Supplies Cost of Equipment
169344 84672 5760
total 259776
Othe costs
Yearly expectation fee Employee training
500 7800 total 8300
Employee salary Number of employees Salary per hour Monthly salary
39 6.5 40560 total 40560
Total expenses 364022
Deficit -200458

To accurately address the expenses, the daycare center must also consider the number of children and the payments that the parents will provide as part of the daycare fee. Below as Exhibit 2 and Exhibit 3, there is a representation of the number of children and the payment per year.

Exhibit 2. The number of children in 2000 

A number of children 2000 In the first 4 months In the next 8 months
168 235.2

Exhibit 3. Revenue

Number of children Fee per month Fee per year
235.2 200 564480

Based on these projections, the daycare center will have a deficit of $200,458 per year of $16,704 per month. The city will donate $2,000 each month to cover some expenses, which will result in a deficit of $14,704 per month. The yearly deficit will therefore be estimated at $176,448. Next, the daycare will receive a grant of $90,000 for the daycare, reducing the deficit to $86,448. Finally, the union will contribute $1 per child per day. Out of 630 female employees of this union, 40% state that they need affordable child care, meaning that there will be approximately 252 children from the union. Hence, the total contribution of the union will be 252*1*20*12=$60,480 per year.

One of the possible scenarios is the change of the child per staff ratio to the maximum amount allowed by the law. The following sections discuss the numerous changes that would occur if the ratio of 1 worker to 8 children were changed from 6 to 8. The adjustments were the cause of the decline in daycare employees. The cost of the workers also decreased as a result of the decline in the number of daycare employees. The first change was an 11% drop in daily hours. The drop results in a fall in the staff members’ overall compensation for daycare. As a result, this has a negative impact on employee benefits, including contributions to social security, pension financing, unemployment, and disability insurance, and health benefits. From January to December, the total costs decreased as a result of the overall effect. Consequently, this will cause the budget deficit to reduce. Generally, the change towards the maximum number of employees per child would have a good impact on a budget of the daycare center.

Another possibility is the enrollment increasing only by 5% per month, which would affect the deficit. The monthly proportion would be affected since the expenses would be lower; however, the fixed costs would remain the same, resulting in more deficits. This would lead to less money being spent by the government on services and benefits for program members, thus lowering the deficit. If enrollment only increased by 5% per month for all months, the deficit would increase from $1.5 billion to $2 billion. This is because it is taking longer than it used to for the government to reduce its deficit. If enrollment only increased by 5% per month for all months, the deficit would still exist after one and two years. Due to the first equation’s assumption that enrollment rises steadily at a rate of 5% per month, the deficit would only be 5% more than expected. The deficit would increase by 5% per month every month. The deficit would increase by 5% per month. The deficit will increase by 5% per month. Look at the graph there. For the months of August, September, and October, we observe a deficit. This is because there are fewer students enrolled in those months than there were in the preceding one. If we increase the enrollment rate by 5% each month from now until graduation, we might have more students enrolled in our university than originally expected in a period of 12 months. This means that there will never be a deficit and that more funding wouldn’t be required.

Some changes can be made to balance the budget further and ensure that there is less deficit that the city will have to cover. For example, the best way to improve this budget plan is to increase the ratio of children per employee, which will help offset the cost of training and employee salary while will allow the daycare to retain more profits (“10 ways to improve y,” n.d.). Additionally, the budget can be improved by optimizing the operating costs, such as expenses per lunch and supplies expenses per child.

This memo offers a new analysis of Daycare’s budget since the eight months of operations have shown that some changes have to be made to Northville Daycare’s budget in order to ensure that the center continues to operate successfully. The key changes crucial to the budget are the alteration of the city’s provision of resources and new services that the provider wants to have. For the year 2001, the daycare center will adopt the sliding scale fee model to adjust the payments for the daycare based on the family’s income. A person’s income determines the service costs that are charged on a sliding scale (Banton, 2021). Typically, they are chosen to account for justice and combat income disparity. You will pay more or less depending on your income, which ranges from higher to lower. Presumably, high-income families can pay the standard fee of 100% or $200 per child. Next, medium-income families can pay 75% of the daycare fee, which would be $150 per month per child. Finally, lower-income families will be offered to pay 50% of the daycare costs or $100 per month.

Exhibit 4. Adjusted budget for 2001 

Salary Social security Unemployment and disability benefits Pension fund Health benefits Paid vacation
Ms. Nemet 28800 2160 2304 1728 720 1680
Ms. Perfekt 15600 1170 1248 936 720 910
total 57976
Operational costs
Snack + lunch Supplies Cost of Equipment
169344 84672 5760
total 259776
Fixed costs
Yearly expectation fee Employee training Liability insurance Theft insurance
500 7800 12000 6000 total 26300
Employee salary Number of employees Salary per hour Monthly salary Social security, unemployment, pension Healthcare
39 7 43680 9609.6 3900 total 57189.6
Total expenses +5% inflation 421303.68
Deficit -143176.32


In summary, one of the most important components of management accounting is budgeting. The projected Northville Daycare budget will be examined in this essay. The number of children who can enroll in the daycare by the year 2000 operations is one of the crucial factors for the budget. The daycare facility will lose $16,704 each month, or $200,458 annually. There will be 252 kids from the union out of the 630 female workers because 40% of them say they need cheap child care. Due to the drop in daycare personnel, the cost of the workforce also decreased. If enrollment simply climbed by 5% every month for all months, the deficit would rise from $1.5 billion to $2 billion. For the year 2001, some adjustments were made to address the changing working hours, vacation, and benefits for the employees. Additionally, the new budget considers the inflation rate and other adjustments to the operations of the daycare center. Additionally, the new model addresses the change in the payment model, offering middle and lower-income families to pay less for the services.


Banton, C. (2021). Sliding scale fees. Web.

Budget analysis. (n.d.). Web.

10 ways to improve your budgeting & forecasting. (n.d.). Web.

USAID. (n.d.). The budget analysis process. Web.

Wayne, J. (2022). Budget examples for day care centers. Web.