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:
	8102Educational supplies ($3 per student)	60	75	90	111	336
	8103Recreational supplies ($2 per student)	40	50	60	74	224
	8105Housekeeping supplies ($2 per student)	40	50	60	74	224
	8201Administrative 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:
	7000Salaries, total	3,126	3,928	4,665	5,402
	7103Employee benefits	175	700	875	1,050
	7201FICA taxes	239	300	357	413
	8001Employee fees paid	11	11	16	16
	8004Staff development training	33	33	33	33
	8005Help wanted ads	9	9	9	9
	8010Membership in other organizations	4	4	4	4
	8101Medical/first aid kit supplies	3	3	3	3
	8104Food and beverage supplied by USDA	0	0	0	0
	8106Office supplies	5	5	10	10
	8111Telephone expense	140	140	140	140
	8112Postage	25	25	30	30
	8401Rent	0	0	0	0
	8402Equipment maintenance	22	22	22	22
	8404Mortgage/note/loan interest	0	0	0	0
	8406Utilities, total	240	240	240	240
	8501General insurance	92	92	92	92
	8502Workmen's compensation	10	13	15	19
	8601Outside printing	25	25	25	25
	8606Subscriptions and publications	2	2	2	2
	8702Van maintenance/insurance/gas	45	45	45	45
	8706Staff mileage	48	48	48	48
	9402Miscellaneous expenses	10	10	10	10
	9500Depreciation	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 HOUSINGAssignment:

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

Although the board approves Mr. Schaefer's proposal at the end of the case, assumeinsteadthat 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 proposal's financial implications. Specifically, prepare an analysis thatincludes the projected revenue, variable costs, and fixed costs for enrollment levels of 20, 25, 30 and 37 students using themonthly 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 enrollat each ofthe 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:

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

oan interpretation of the results of your CVP analysis

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