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Question

Your client manages a daycare center. Costs are as follows:

Food

costs                         $    90

Rent                                             36,000

Salaries                                        80,000

Material costs                                    60

Taxes                                           20,000

Insurance                                   12,000

Miscellaneous                                    8,000


You currently charge $ 500 per month per child. You plan a profit of $ 25,000 per year.


Using the Breakeven analysis spreadsheet


Answer the following questions


Total Variable Costs                         ___________

Total Fixed Costs                     ___________

Breakeven Point in Units per year      ___________

Breakeven Point in Dollars per year   ___________


Your friend is considering moving the business location to a more expensive neighborhood. Costs will change as follows:


Food costs                         $    120

Rent                                              50,000

Salaries                                        100,000

Material costs                                      75

Taxes                                            30,000

Insurance                                    14,000

Miscellaneous                                    12,000


The monthly fee per child would be $ 700 and the profit component would increase to $ 50,000.


Answer the following questions


Total Variable Costs                         ___________

Total Fixed Costs                     ___________

Breakeven Point in Units per year      ___________

Breakeven Point in Dollars per year   ___________


Using the Breakeven analysis spreadsheet


Based on your review of the two scenarios list the pros and cons of moving to the new location. Make sure you include data from the spreadsheets to support your answer.


PROS






CONS






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