The Country Fields Retirement Community charges $6000/month for a single senior citizen to reside in an efficiency apartment with assisted living care. The facility has operating expenses of $600,000 per month. Staffing levels are dependent on the number of residents. Each senior who enters the community requires additional food, personal care, and support staff time. The estimated cost for each person is $4000 per person per month. (a) How many senior citizen residents does the facility need to have in order to reach the breakeven point? (b) What is the company’s annual profit or loss if they maintain an average residency level of 350 senior citizens?
The Country Fields Retirement Community charges $6000/month for a single senior citizen to reside in an efficiency apartment with assisted living care. The facility has operating expenses of $600,000 per month. Staffing levels are dependent on the number of residents. Each senior who enters the community requires additional food, personal care, and support staff time. The estimated cost for each person is $4000 per person per month.
(a) How many senior citizen residents does the facility need to have in order to reach the breakeven point?
(b) What is the company’s annual profit or loss if they maintain an average residency level of 350 senior citizens?
Answer:
Given,
The community charges $ 6000/month for a single senior citizen.
Let the number of senior citizens be x. So the total revenue function of the company will be:
Now,
Operating expenses = $600,000 per month
Staffing cost (or variable cost) is dependent on the number of senior citizens = 4000x
The total cost function will be:
(a).
At break-even, TR=TC
To reach a break-even 300 senior citizens should be in the facility.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
