Question

A not-for-profit childcare center wants to expand its services by offering an after-school program. The after-school program would operate 40 weeks per year, 4 hours a day, 5 days a week. The program would have a capacity of 20 students per week, and would charge $80 per student per week. The program will be staffed by two teachers who will each be paid $25 per hour. The program will pay $15,000 a year in rent and utilities, spread evenly throughout the year, and will also pay $200 per week it is open for childcare insurance.

The program will purchase furniture and media equipment at a cost of $10,000. The furniture and equipment are expected to last 5 years and to have no salvage value. In order to purchase the furniture and equipment, the program will take out a bank loan of $8,000 on the first day of operations. The bank loan has an annual interest rate of 4%; no principal repayment will be due during the first year. Supplies will cost $5 per student per week and snacks will cost $3 per student per week.

(a) How many children per week must the center serve in order to break even? Show your calculations. What would you advise the board to decide based on financial criteria?

Answer 1

(Amounts below are in $)
Break Even Point= Fix cost pu/Contribution pu
53000/2880
18.40277778
19 students
where,
Fix Cost:
Salary	20,000
Rent	15,000
Insurance	8,000
Furniture	10,000
Total	53,000
Contribution per unit
Revenue	3,200
Supplies	200
snacks	120
Contribution	2,880
Hrs in a year	800

The not for profit organisation will have to operate almost at its full capacity to operate in a no profit, no loss situation with 19 students on an average.