Analysis of Financial Projections - With Given Case Data
			---------- Total Number of Students ----------
			20	25	30	37	Total
Revenue:
	2-3 year olds ($17 per day x 250/12 x 80%)		2,550	3,400	4,250	5,383	15,583
	4-5 year olds ($16 per day x 250/12 x 80%)		1,333	1,867	2,400	3,200	8,800
	5 year olds ($7 per day x 250/12 x 80%)		700	700	700	700	2,800
		Total revenue	4,583	5,967	7,350	9,283	27,183
Variable costs:
	8102 Educational supplies ($3 per student)		60	75	90	111	336
	8103 Recreational supplies ($2 per student)		40	50	60	74	224
	8105 Housekeeping supplies ($2 per student)		40	50	60	74	224
	8201 Administrative expense (14% of total revenue)		642	835	1,029	1,300	3,806
		Total variable costs	782	1,010	1,239	1,559
		Contribution margin (CM)	3,801	4,957	6,111	7,724
Fixed costs:
	7000 Salaries, total		3,126	3,928	4,665	5,402
	7103 Employee benefits		175	700	875	1,050
	7201 FICA taxes		239	300	357	413
	8001 Employee fees paid		11	11	16	16
	8004 Staff development training		33	33	33	33
	8005 Help wanted ads		9	9	9	9
	8010 Membership in other organizations		4	4	4	4
	8101 Medical/first aid kit supplies		3	3	3	3
	8104 Food and beverage supplied by USDA		0	0	0	0
	8106 Office supplies		5	5	10	10
	8111 Telephone expense		140	140	140	140
	8112 Postage		25	25	30	30
	8401 Rent		0	0	0	0
	8402 Equipment maintenance		22	22	22	22
	8404 Mortgage/note/loan interest		0	0	0	0
	8406 Utilities, total		240	240	240	240
	8501 General insurance		92	92	92	92
	8502 Workmens compensation		10	13	15	19
	8601 Outside printing		25	25	25	25
	8606 Subscriptions and publications		2	2	2	2
	8702 Van maintenance/insurance/gas		45	45	45	45
	8706 Staff mileage		48	48	48	48
	9402 Miscellaneous expenses		10	10	10	10
	9500 Depreciation		0	0	0	0
		Total fixed costs	4,264	5,655	6,641	7,613
		Total variable and fixed costs	5,046	6,665	7,880	9,172
		Operating profit (loss)	(463)	(698)	(530)	111
		Weighted average CM per student	190.05	198.28	203.70	208.76
		Number of students needed to break even	22.44	28.52	32.60	36.47
		Round up break-even students	23	29	33	37
		Total CM without administrative fee	4,443	5,792	7,140	9,024
		Weighted average CM per student w/o admin. fee	222.15	231.68	238.00	243.89
		Breakeven number of students w/o admin. fee	19.19	24.41	27.90	31.21
		Round up break-even students	20	25	28	32

DAY CARE IN PUBLIC HOUSING Assignment:

Dan Schaefer, executive director of the Petersburg, Va., office of the Volunteers of America (VOA), is eager for the board of directors to approve his plan to open a day-care center in the Alta Vista housing community. Mr. Schaefer believes this proposal is an ideal way to begin to rebuild Alta Vista. The Petersburg VOA helped to establish this community in 1971; unfortunately, the residents have seen a rise in criminal activity and a decrease in their quality of life.

Although the board approves Mr. Schaefers proposal at the end of the case, assume instead that he has hired you to

analyze the proposal in preparation for the board meeting. Specifically, Mr. Schaefer wants you to do the following:

Prepare a cost-volume-profit (CVP) analysis of the proposals financial implications. Specifically, prepare an analysis that includes the projected revenue, variable costs, and fixed costs for enrollment levels of 20, 25, 30 and 37 students using the monthly projections in Attachment A of the case. Then, compute the weighted average contribution margin (CM) per student (computed as the total CM divided by the number of students enrolled) and the number of students that need to enroll at each of the four levels of enrollment for the center to break even. For this analysis, I have provided an Excel template in which I havealready sorted variable and fixed costs; I have included the raw data. However, I have not included the formulas.

Prepare a memorandum for Mr. Schaefer that includes:

o the benefits and challenges of the Alta Vista day-care center project

o an interpretation of the results of your CVP analysis

o recommendations for Mr. Schaefer about what he should consider and/or do before the board meeting