1. As indicated, the training group suffered a loss in 2007. Thus, unbeknownst to Marie, Mayfield management is considering shutting down the training center. Given the results of 2007, what would be the effect on Mayfield Software's total company profit in 2008 if the training center is closed at the start of the year?

Chapter 3 Cost_volume-profit analysis MAYFIELD SOFTWARE, CUSTOMER TRAINING Marie Stefano is the group director of customer training for Mayfield Software. In this capacity, she runs a center in Kirkland, Washington, that provides training to employees of companies that use Mayfield's inventory control, customer management, and accounting software products. Her group employs a receptionist and an office manager/bookkeeper, and she has arrangements with several part-time trainers who are hired on an as-needed basis. (They are all retired employees of Mayfield Software.) Trainers are paid $3,750 per daylong class. Mayfield is a decentralized company, and Marie is given considerable authority to advertise and conduct classes as she sees fit. During 2007, the group conducted 810 day-long classes with an average enrollment of 18 students paying $350. The group's Report of Operating Results for 2007 is detailed next. Report of Operating Results, 2007 Revenue Less operating costs: $5,103,000 Trainer costs Director salary Receptionist Office manager Utilities, phone, etc. Lease expense related to computers, servers, etc. Rent Operating manuals for participants Postage, envelopes, paper, etc. 3,037,500 165,000 51,000 75,000 32,000 360,000 Advertising Total operating costs Profit before central charges Central charges Group profit 157,000 4,421,835 681,165 765,450 ($84,285) Additional Facts 96,000 437,400 10,935 1. All equipment is leased on a yearly basis. Costs include 100 workstations for students (one workstation for every seat in each of the four 20-student classrooms), plus servers and other miscellaneous equipment. While average class enrollment is 18 students, some classes are full (20 students), and classes are cancelled if enrollment is fewer than 12 students. Classes typically are held Monday through Friday, although some classes are held on Saturdays and Sundays. 2. Rent relates to the training center in Kirkland, which is not part of Mayfield's main campus located in Bellevue, Washington. 3. Advertising costs relate to the cost of monthly advertisements in trade journals such as TechWorker and Inventory Management. These ads provide information on upcoming training sessions. 4. Operating manuals are provided to each participant. 5. Postage, envelopes, and paper costs relate primarily to billing companies for employees who participate in classes. This cost varies with the number of participants. 6. Central charges are assigned to each group at Mayfield Software based on actual sales. The allocation relates to costs incurred for the benefit of the company as a whole, including salaries of the CEO and company president, legal costs, costs related to the company's central office building, brand advertising, and so on. The charge is 15 percent of revenue. Required 1. As indicated, the training group suffered a loss in 2007. Thus, unbeknownst to Marie, Mayfield management is considering shutting down the training center. Given the results of 2007, what would be the effect on Mayfield Software's total company profit in 2008 if the training center is closed at the start of the year? 2. Given the current room configuration and approach to allocation of central charges (15 percent of revenue), calculate the number of classes that must be offered (with an average enrollment of 18 students) for Marie'sgroup to break even on the Report of Operating Results. 3. Recalculate your answer to part b assuming Marie can lower the amount paid to instructors to $3,000 per class. Should Marie seriously pursue this option? 4. Mayfield Software is releasing version 4.0 of CustomerTrack in 2008. Marie believes that this will create a demand for 30 additional daylong classes with an average enrollment of 18 students per class. What effect will this have on \"group profit\" on Marie's Report of Operating Results? Assume instructors will be paid $3,750 per class