Q1) Janice Colangelo heads Training Centre of large HR Consulting firm EMT Consulting. Firm has 3 main departments: Recruitment, Training and Career Services.
Training Centre gives management training for employees of different businesses. Recruitment gives recruitment services and Career Services assists personnel with resumes and offers advice on career planning.
Training Centre employs two administrative assistants, 1 training officer and Janice, manager on permanent basis. Part-time trainers are hired on as-needed basis. Part-time trainers are paid $1500 per workshop.
During 2008 Training Centre conduction 200 workshops with 20 individuals in each. Charge per individual was $300. This is maximum number of workshops which can be held in a year.
Following are the results for 2008.
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Training Revenue (200 x 20 x $300)
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$1,200,000
|
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Less Expenses:
|
|
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Trainer costs (200 x 2 x $1500)
|
600,000
|
|
Manager's Salary
|
120,000
|
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Training officer
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90,000
|
|
Administrative staff
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80,000
|
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Utilities/phone costs
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20,000
|
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Manuals for participants
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120,000
|
|
Advertising costs
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125,000
|
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Postage & other miscellaneous costs
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9,450
|
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Total expenses
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$ 1,164,450
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|
|
|
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Income from operations
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$35,550
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Common Allocated costs (10% of revenue)
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120,000
|
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Net Income or (loss)
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$(84,450)
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Required:
1)a) Categorize each of costs as variable or fixed.
b. What would be effect on profit of entire company, if Training Centre was closed at beginning of the New Year?
2) Given allocated costs at 10% of revenue, compute number of workshops which should be offered to break-even.
3. Re-compute #2 above, suppose Janice can re-negotiate part-time trainers' cost to $1000 per workshop.
4. With increase in globalization and companies outsourcing many jobs, Janice thinks that, in addition to management training, Training Centre must offer "second career" training. Janice feels that this will add 100 more workshops with average enrollment of 15 participants at cost of $200 each. Rate per participant is based on \ fact that non-profit organization has presented its facilities, free of charge, to run workshops.
What effect will this have on Training Centre profit?