Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows: CostSchedule : Variable Costs: Lunch & snacks $1,000 Education Supplies 750 Other supplies (toiletries etc.) 250 $2,000 Fixed Costs: Rent $20,000 Utilities 3,000 Insurance 3,000 Salaries 30,000 Miscellaneous 4,000 $60,000 Required: a) Compute the charge per child, using the equation method. b) What is the contribution per child? What is the contribution margin ratio? c) Calculate Tiny Tot’s break-even point in number of children and in sales dollars.
Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows:
|
CostSchedule |
: |
|
|
Variable Costs: |
Lunch & snacks |
$1,000 |
|
Education Supplies |
750 |
|
|
Other supplies (toiletries etc.) |
250 |
|
|
|
$2,000 |
|
|
Fixed Costs: |
Rent |
$20,000 |
|
Utilities |
3,000 |
|
|
Insurance |
3,000 |
|
|
Salaries |
30,000 |
|
|
Miscellaneous |
4,000 |
|
|
|
$60,000 |
Required:
a) Compute the charge per child, using the equation method.
b) What is the contribution per child? What is the contribution margin ratio?
c) Calculate Tiny Tot’s break-even point in number of children and in sales dollars.
d) Calculate the margin of safety in number of children and sales dollars.
e) Given the expected enrolment of 50 children, prepare a contribution margin income statement for the year ended December 31, 2015, detailing the components of total fixed costs, and clearly showing contribution and operating income.
f) Assuming that normal enrollment at the Daycare Centre is 50 children; construct a break-even chart, clearly showing the break-even point in units and sales dollars and the margin of safety in units and in sales dollars.
g) Assume that Tiny Tots target operating income is $156,000 per month. Calculate the number of children that must be enrolled for this goal to be realized. Is this a realistic goal?
Tiny Tots lost its lease and had to move to another building. Monthly rental for the new building is $28,000. At the suggestion of the parents, Tiny Tots plans to take the children on outings. Monthly cost for the outing is $10,000. By how much should Tiny Tots increase monthly fees to meet the target operating income of $156,000 per month, assuming the expected enrolment of 50 children?
Step by step
Solved in 4 steps
Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows:
|
CostSchedule |
: |
|
|
Variable Costs: |
Lunch & snacks |
$1,000 |
|
Education Supplies |
750 |
|
|
Other supplies (toiletries etc.) |
250 |
|
|
|
$2,000 |
|
|
Fixed Costs: |
Rent |
$20,000 |
|
Utilities |
3,000 |
|
|
Insurance |
3,000 |
|
|
Salaries |
30,000 |
|
|
Miscellaneous |
4,000 |
|
|
|
$60,000 |
Assume that Tiny Tots target operating income is $156,000 per month. Calculate the number of children that must be enrolled for this goal to be realized. Is this a realistic goal?
Tiny Tots lost its lease and had to move to another building. Monthly rental for the new building is $28,000. At the suggestion of the parents, Tiny Tots plans to take the children on outings. Monthly cost for the outing is $10,000. By how much should Tiny Tots increase monthly fees to meet the target operating income of $156,000 per month, assuming the expected enrolment of 50 children?
by Bartleby ExpertTiny Tots Daycare Centre provides daycare for children Mondays through Fridays. The business had $140,000 of net income in 2015, when 50 students were enrolled and data for variable costs per child and total fixed costs were as follows:
|
CostSchedule |
: |
|
|
Variable Costs: |
Lunch & snacks |
$1,000 |
|
Education Supplies |
750 |
|
|
Other supplies (toiletries etc.) |
250 |
|
|
|
$2,000 |
|
|
Fixed Costs: |
Rent |
$20,000 |
|
Utilities |
3,000 |
|
|
Insurance |
3,000 |
|
|
Salaries |
30,000 |
|
|
Miscellaneous |
4,000 |
|
|
|
$60,000 |
Required:
d) Calculate the margin of safety in number of children and sales dollars.
e) Given the expected enrolment of 50 children, prepare a contribution margin income statement for the year ended December 31, 2015, detailing the components of total fixed costs, and clearly showing contribution and operating income.
f) Assuming that normal enrollment at the Daycare Centre is 50 children; construct a break-even chart, clearly showing the break-even point in units and sales dollars and the margin of safety in units and in sales dollars.
g) Assume that Tiny Tots target operating income is $156,000 per month. Calculate the number of children that must be enrolled for this goal to be realized. Is this a realistic goal?
Tiny Tots lost its lease and had to move to another building. Monthly rental for the new building is $28,000. At the suggestion of the parents, Tiny Tots plans to take the children on outings. Monthly cost for the outing is $10,000. By how much should Tiny Tots increase monthly fees to meet the target operating income of $156,000 per month, assuming the expected enrolment of 50 children?
by Bartleby Expert
