CVP analysis with semifixed costs. Rosemary Wong, director and owner of the 2 I s t Century Day Care Center, has a master's degree in elementary education. In the seven years she has been running the 21st Century, her salary has ranged from nothing to $ 20,000 per year. "The second year," she says. "1 made 62 cents an hour." (Her salary is what's left over after meeting all other expenses.)

Could she run a more profitable center.' She thinks perhaps she could if she increased the student-teacher ratio, which is currently five students to one teacher.

(Government standards for a center such as this set a maximum often students per teacher.) She refuses to increase the ratio to more than six-to-one. "If you increase the ratio to more than six-to-one, the children don't get enough attention. In additeachertison., the demands on the teacher are far too great." She does not hire part-time Rosemary rents the space for her center in the basement of a church for $900 per month, including utilities. She estimates that supplies, snacks, and other nonpersonnel costs are $80 per student per month. She charges $3X0 per month per student.

Teachers receive $1,200 per month, including fringe benefits. She has no other operating costs. At present, she cares for 30 students and employs six teachers.

a. What is the present operating profit per month of the 21st Century Day Care Center before Ms. Wong's salary?

b. What is (are) the break-even point(s), before Ms. Wong's salary, assuming a student-teacher ratio of 6: 1 ?

c. tWehaacth e rw o rualtdio bien c rtehae s ebdr e atko - e10v:e n1 ? point(s). before Ms. Wong's salary, if the studentd.

Ms. Wong has an opportunity to increase the student body by six students. She must take all six or none. Should she accept the six students, if she wants to maintain am aximum student-teacher ratio of 6: 1 ?

e. (Continuation of part d.) Suppose that Ms. Wong accepts the six children. Now she has the opportunity to accept one more, which requires hiring one more teacher. What would happen to profit, before her salary, if she accepts one more student?