Question - Rainbow Centre provides day-care for children during weekdays from 8:00 am to 6:00 pm Monday to Friday. The monthly variable costs of the centre per child are as follows:
|
Lunch and snacks
|
$160
|
|
Education supplies
|
45
|
|
Other supplies (paper products, toiletries etc.)
|
35
|
|
Total
|
$240
|
In addition, the monthly fixed costs of the centre consist of:
|
Rental
|
$1,600
|
|
Utilities
|
230
|
|
Insurance
|
170
|
|
Salaries
|
2,150
|
|
Miscellaneous
|
350
|
|
Total
|
4,500
|
Rainbow Centre charges its service to each parent $490 per child, per month.
You are required to:
1. Calculate the break-even point.
2. Rainbow centre's target profit is $7,000 per month, and you are required to calculate the number of children who must be enrolled to achieve the target profit.
3. Rainbow centre lost its lease and had to move to another building. Monthly rent for the new building is $2,700. At the suggestion of parents, the centre plans to take children on excursion once a month which cost the centre $1,200 per month. By how much should the centre increase fees per child to meet the target profit of $7,000 per month, assuming number of children enrolled is 46.