Tots R Us Case Write Up

Rupender Nijjar

Joseph Antonacci

Clint Brill

“Tots R Us”

Case Study

1)

Cost of single pre school class is estimated as total of 1200 meetings per year =$270

Cost of single birthday party is estimated as total of 150 parties held per year= $90

2) I would not recommend that TRU should continue to allocate the building-related cost to pre school program only. TRU provide business with preschool classes and the birthday parties, all costs should be accounted based on the percentage each service use it. In order to do that TRU need the exact number of children and exact labor hour spent on preschool program as well as for birthday parties. it is good if they do birthday parties at $90 at each. The alternative method we would suggest that they should use is the Step-Down method. The goal of Step- down method is to balance a budget by reducing the number of expenses. It allows support departments to allocate cost to each other.

3) TRU should use that space to do more birthday parties. As we calculated unit cost in question 1, each birthday party will cost $90.By using that space they will make profit

4)

Labor 15/1.5= 100

           85/1.2= 71

Party  3/1.5=20

          18/1.2=15

I do agree with TRU’s allocation method for salaries, supples, and food. TRU is using the direct cost allocation method, it is a system of dividing overhead expenses between the various departments. In this case, given the number of hours and number of days per week the employees are available, their cost gets allocated and based on the number of children attending the class and the birthday party the cost for supplies and food is computed

5) No I do not agree with TRU’s decision not to allocate the cost of advertising. It was used to build awareness of TRU’s presence in the community, failure to do so it can create inefficiencies waste.Advertising is important, as it will bring more customers. TRU should use the Step-Down method to allocate the advertising costs. With this method we would be able to tell the total advertising costs.

6)

Party: