ACCTBA3 GROUP BUSINESS CASE (5% of class standing grade)

3rd Term, Academic Year 2014-2015

MARIAN LEARNING CENTER
Marian Learning Center is a day-care center/preschool which operates as a partnership of Linda Rivera
and Betina Domingo. The center is in a city that has a large base of two-income families who have a
need for quality day care. The two women started the center this year. Domingo contributed P40,000
to get the business started to purchase equipment and to operate through the early months. Rivera,
who previously managed another center, is the director of the center and draws P2,000 per month for
her services. Partnership profits and losses, after Riveras salary, are split 75 percent for Domingo and
25 percent for Rivera.
Marian Learning operates from 6 a.m. to 6 p.m., Monday through Friday, is in a single building, which
has a capacity limit of 120 children, and meets city and state regulations. At present, the center has six
classes, all at maximum sizes, structured as follows:

Age
2 to 3
3 to 4
4 to 5
5 to 6

Number of
Classes
2
1
1
2

Children per
Class
10
15
15
15

Total Children
20
15
15
30

Monthly Tuition Per

Child
P320
P280
P280
P260

Class sizes are determined by Department of Education which sets a limit on the number of children per
instructor. The center uses one instructor per classroom.
Tuition is charged monthly. Minor adjustments are made on an individual basis. In October, the most
recent month with data available, revenues were P21,500 (P22,600 less P1,000 adjustments). Monthly
revenues should be rather stable since classes are full most of the time. Expenses for October were:
Salaries for instructors
Salary of director
Salary of part-time cook
Food expenses
Staff benefits expenses
Supplies expenses
Occupancy and other administrative expenses
Total expenses

P9,600
P2,000
900
2,200
2,450
600
3,250
P21,000

Fixed expenses are the salary of the part-time cook and occupancy and other administrative expenses.
The salary of the director is fixed; but, as a partnership, this is in reality a distribution of profits but is
included in expenses for comparative purposes.

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Food is P1.25 per student per day. Staff benefits are 10 percent of salaries plus P200 per person for
benefit programs for instructors averaging P1,600 per instructor per class.
Rivera wants to increase the quality of service by decreasing class sizes and also expanding student
enrollments. These alternatives are interrelated. Rivera thinks that class sizes are too large and that
children are not getting the individual attention they require. Rivera surveyed parents of all 80 students
to measure their support for a tuition increase tied to a reduction in class size. For children ages 2 to 5,
most parents would support a 25 percent tuition increase, and nearly 50 percent would support a 50
percent increase. Of the 5-to-6 age group parents, nearly three-fourths did not want any increase. The
remainder said they would support a 25 percent increase but no more.
Proper class size is very subjective. However, Rivera feels that she could achieve a child/instructor ratio
of 6 to 1 for the 2-to-3 age group; an 8 to 1 ratio for the 3-to-4 and 4-to-5 age groups; and a 10 to 1 ratio
for the 5-to-6 age group.
The center has easily maintained the 80 student level, with each class full. Rivera keeps in touch with
waiting-list parents to make certain each is still interested. This list provides children when someone
leaves the center. The current waiting list is as follows:
Age Group
2 to 3
3 to 4

Number of Children
5
7

Age Group
4 to 5
5 to 6

Number of Children
4
11

Rivera does not start a new class unless more students are on the waiting list than are required per class.
Obviously, enough students are on the 5-to-6 age group waiting list to start a new class. Lately,
however, she has wondered if the center could make a profit by starting classes with fewer than the
requisite number, taking the chance that new students would appear and could be added immediately.
Information from her various inquiries imply that a potential market for quality infant care (0 to 24
months) exists. Rivera doesnt think this expansion would be profitable. However, she has never done
an analysis of the situation and has not thought about an appropriate tuition. She believes that the
infant/instructor ration in her center should be no higher than 5 infants to one instructor. The center
would have no food costs for the infants.
Domingo will only agree to Riveras suggested changes if the center will continue to operate at or above
the current profit level.

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INSTRUCTIONS
1. Look at each decision separately, as incremental to the current situation, and evaluate the
marginal profit:
a. If class size is decreased (keeping the same 80 students), what increase in tuition is
necessary to keep the current monthly profit level?
b. Without regard to (a), is it profitable to create the new class from the waiting list?
Explain.
c. Use the new fee structure as found in (a). Is it profitable to move to smaller class sizes, if
new full classes are created and filled to their new maximum using the waiting list? Show
calculations.
d. Is a class for infant care profitable if tuition is the same as the proposed class tuition for
the 2-to-3 age group?
2. Write a brief memo to Rivera and Domingo highlighting any concerns that underlie the analyses
you have performed in Part 1. Use the following points to guide you in drafting your memo:
a. After evaluating the four alternatives in Part 1, which would be the best alternative that
you would recommend to Rivera and Domingo assuming that the parents would be
willing to pay the proposed tuition fees?
b. Discuss the qualitative considerations involved in the following problem areas:
i. Tuition
ii. Waiting list
iii. Infant care
iv. Teacher availability
v. Other cost behaviors
c. Do you think that the assumptions are heavily based on class size and cost patterns? Why
or why not? If so, what would you recommend to Rivera and Domingo to minimize the
risk of the changes of the key assumptions used in the analysis.
3. What would you suggest to improve the overall operations of the learning center? Cite some
strategies/management approaches that could be useful to contribute to the centers
improvement.
4. Based on your recommendations, prepare a projected income statement that could be used by
the management in its decision-making for the succeeding school years operations.
FORMAT
1. Outline:
I. INTRODUCTION
II. DISCUSSION: (This is the bulk of the paper. Be sure to include answers to guide questions and
support your answers with computations and logical ANALYSIS.)
III.CONCLUSION/RECOMMENDATION
IV. REFERENCES: (if any)

Page 3 of 6

2. Format of Written Report:

a) Paper size: 8.5 x 11
b) Margin: 1 on all sides
c) Font and Font size: Tahoma 11
d) Paragraph alignment: Justified
e) Paragraph spacing: 1.5
f) Length of written report: 5 to 10 pages, EXCLUDING cover page and attachments
g) Attachments: Include the copy of the business case and other attachments at the end of your
report.
h) Insert the entire report in a short sliding folder.
i) The cover page should be as follows:
NAME OF THE COMPANY

A Group Business Case

Presented to the
Accountancy Department
De La Salle University

In partial fulfillment
Of the course requirements
In ACTMANA / ACCTBA3

SUBMITTED TO:
(Name of Faculty)

SUBMITTED BY:
Surname, Given Name, M.I.*
Surname, Given Name, M.I.
Surname, Given Name, M.I.
Surname, Given Name, M.I.

Date
*NOTE: The names should be arranged alphabetically.

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3. Deadline of Written Report:

MW class April 21, 2015 (5pm)
TH class April 21, 2015 (5pm)
Kindly submit the group business case at the Accountancy Department and have Miss MJ, the
secretary, affix her signature and submission time on the front cover of the business case.
4. Rubric/Criteria for Grading:
a) To compute for the 5% team grade, please refer to next page for the rubric.
b) To compute for the individual written group business case analysis grade, the average peer
evaluation grade (refer to Item#7) will be multiplied to the team grade. A sample computation
follows:
Application of ACTMANA-related tools 100% * weight of 50% = 50.00%
Depth of insights
90% * weight of 30% = 27.00%
Quality in writing paper
90% * weight of 20% = 18.00%
Team grade
= 95.00%
Multiplied by: Average peer evaluation grade
(Assume 2 exemplary, 1 satisfactory or 290%/3)
96.67%
INDIVIDUAL GRADE
91.83%
Multiplied by: Business case grade
5%
INDIVIDUAL BUSINESS CASE GRADE
4.59%
CRITERIA

Application
of
ACTMANArelated
tools and
skills
[50%]
Depth of
insights
and
discussions
[30%]

Quality in
writing the
paper
(format,
grammar)
[20%]

EXEMPLARY
100%
The group applies
at least two
ACTMANA-related
tools and skills
appropriately and
includes only
realistic
assumptions in
the paper.
The group relates
properly the case
to the learnings
in ACTMANA
course and shows
comprehensive
knowledge on
ACTMANA topics.

SATISFACTORY
90%
The group applies
two ACTMANA related tools and
skills
appropriately and
includes a few
unrealistic
assumptions in
the paper.
The group relates
properly the case
to the learnings
in ACTMANA
course and shows
some knowledge
on ACTMANA
topics.

The group follows

the format and
has not one
spelling/
grammatical error
in the paper.

The group follows

the format and
uses only the
English language
in the paper
which is at an
acceptable level.

DEVELOPING
80%
The group applies
only one
ACTMANA related tool and
skill appropriately
and includes
some unrealistic
assumptions in
the paper.
The group relates
somewhat
improperly the
case to the
learnings in
ACTMANA course
and shows little
knowledge on
ACTMANA topics.
The group follows
the format but
uses a mixture of
Filipino and
English language
in the paper
and/or uses the
English language
somewhat
inappropriately.

Page 5 of 6

BEGINNING
70%
The group fails to
apply at least one
ACTMANA related tool and
skill appropriately
and includes
many unrealistic
assumptions in
the paper.
The group fails to
relate properly
the case to the
learnings in
ACTMANA course
and shows little
to no knowledge
on ACTMANA
topics.
The group does
not follow format
and uses a
mixture of Filipino
and English
language in the
paper and/or
uses the English
language
inappropriately.

5. Peer Evaluation
a) On a one-half sheet of bond paper, cross-wise, write the names of all your group mates (in
alphabetical order).
b) Give the corresponding percentage (70, 80, 90, 100) for each of your group mate. Refer to table
below. Be fair when evaluating.
c) Print your name then sign as evaluator.
d) Include this as an attachment at the end of the paper.
CRITERIA

Contribution
to teams
final output
[100%]

EXEMPLARY
100%
The student
contributes to
the teams final
output more
than what is
expected.

SATISFACTORY
90%
The student
contributes to the
teams final
output as
expected.

DEVELOPING
80%
The student
contributes
somewhat to the
teams final
output.

Page 6 of 6

BEGINNING
70%
The student does
not contribute to
the teams final
output.