CASE FIELD SOFTWARE, CUSTOMER TRAINING [LO 2 ace Stedano is the group director of cuastomer Marie d Software. In this capacity, she runs a center in training and classes are a or Nay washington, that provides training to employees ofalthouh some classes are held on Saturdays and Sundays cancelled if enrollment is fewwer than 15 stu Classes typically are held Monday through Friday, dents that use Mayfield's inventory control, customer man 2. Rent relates to the cospn and acounting software products. Her group employs eimenhi nist and an office manager/bookkeeper, and she hasWashington training center in Kirkland, which is not part of Mayfields main campus located in Bellevue with several part-time trainers who are hired on n Mayficld 3. Advertising costs relate to the cont of monthly advertise sofbware)Trainers are paid $4,000 per daylong class Mayficld is a ments in trade journals such as Tech Worker and Inventory decentralized company, and Marie is given considerable authorityManagement. These ads provide information on upcoming as-nceded basis. (They are all retired employees of o advertise and conduct classes as she sees ft 4. Operating manuals are provided to each participant 5. Postage, envelopes, and paper costs relate primarily to bil ing companies for employees who participate in classes Report of Operating Results, 2016 This cost varies with the number of participants Revenue Less operating costs: $6,120,000 $3,400,000 180,000 60,000 80,000 38,000 6. Central charges are assigned to each group at Mayfield Soft ware based on actual sales. The allocation relates to costs incurred for the benefit of the company as a whole, includ ing 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 20 percent of revenue 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.12,750 REQUIRED 400,000 100,000 a. As indicated, the training group suffered a loss in 2016. Thus unbeknownst to Marie, Mayfield management is considering shutting down the training center. Given the results of 2016, what would be the effect on Mayfield Softwares total company profit in 2017 if the training center is closed at the start of the 10,000 160,000 Total operating costs Profit before central charges Central charges Group profit 4,940,750 1,179,250 year? b. Given the current room configuration and approach to allo cation of central charges (20 percent of revenue), calculate the S 44.750 number of classes that must be offered (with an average enroll ment of 20 students) for Marie's group to break even on the During 2016 the group conducted 850 day-long classes with Report of Operating Results an average enrollment of 20 students paying $360. The groups Report of Operating Results for 2016 is detailed above C.Recalculate your answer to part b assuming Marie can lower the amount paid to instructors to $3,500 per class. Should ADDITIONAL FACTS Marie seriously pursue this option? d. Mayfield Software is releasing version 4.0 of Customer Track 1. All equipment is leased on a yearly basis Costs include 100 in 2017. Marie believes that this will create a demand for 30 workstations for students (one workstation for every seat additional daylong classes with an average enrollment of 20 stu in each of the four 25-student classrooms), plus servers and dents per class. What effect will this have on "group profiton other miscellancous equipment. While average class en Marie's Report of Operating Results? Assume that instructors rollment is 20 students, some classes are full (25 students), will be paid $4,000 per class
