Question:
Firm and Fun Accounting School teaches students how to become a good accountant. The following relates to the income and costs analysis for the school:
Fees charged
Senior Accounting Class - $50 per class per student
Junior Accounting Class - $30 per class per student
Costs
•Resources - $100 per senior students, $75 per junior students
•Teacher - $25,000 per annum (there are 2 teachers in the school. One for senior classes, one for junior class)
•Class Consumables (such as whiteboard markers, worksheets) - $70 per student
•Administrative Expenses - $30,000 per annum
•Finance Costs - $7,000 per annum
There are 40 lessons in a school year for both senior and junior levels.
Suppose there are 50 senior students and 40 junior students enrolled. Each class is made up of 8 students and school fees are not refundable.
REQUIRED TO ATTEMPT AND ANSWER:
The school plans to accept only senior students next year. The administrative expenses will drop down to $25,000 per annum. The resources per class will increase to $110 per unit because less amount of bulk buying incurred.
a) How many students are needed in order to achieve breakeven.
b) How many classes need to be taught in order to achieve breakeven.
c) Suppose the business wants to achieve $25,000 profit at the end of the year, calculate the number of classes is needed to achieve this.
d) Calculate the margin of safety (in number of class). There are 50 students enrolled for next year's course.