Middlehurst House is a daycare center

Middlehurst House is a daycare center/preschool which operates as a partnership of George Friedman and Bill Compton. The center is in a city that has a large base of twoincome families who have a need for quality day care. The two men started the center this year. Compton contributed $40,000 to get the business started—to purchase equipment and to operate through the early months. Friedman, who previously managed another center, is the director of the center and draws $2,000 per month for his services. Partnership profits and losses, after Friedman 's salary, are split 75 percent for Compton and 25 percent for Friedman. Middlehurst House operates from 6 a.m. to 6 p.m., Monday through Friday. It is in a single building that 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: Number of classes Children per class Total children Monthly tuition per child 2 to 3 2 10 20 $320 3 to 4 1 15 15 280 4 to 5 1 15 15 280 5 to 6 2 15 30 260 Class sizes are determined by state law 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 $21,500 ($22,600 less $1,100 adjustments). Monthly revenues should be rather stable since classes are full most of the time. Expenses for October were: Salaries for instructors $9,600 Salary of director 2,000 Salary of part-time cook 900 Food expenses 2,200 Staff benefits expenses 2,450 Supplies expenses 600 Occupancy and other administrative expenses 3,250 Total expenses $21,000 Fixed expenses are the salary of the part-time cook and occupancy and other administrative expenses. The salary of the director is fixed—as a partnership, this is in reality a distribution of profits, but it is included in expenses for comparative purposes. Food is $1.25

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