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 have already 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:
  • the benefits and challenges of the Alta Vista day-care center project
  • an interpretation of the results of your CVP analysis
  • recommendations for Mr. Schaefer about what he should consider and/or do before the board meeting
  • The following questions should guide you in the identification of important case issues

4) What is the break-even number of students needed to enroll without the administrative fee to the VOA office? Should the office charge this fee to the day-care center in the short term? In the long term? Is charging the fee consistent with the VOAs mission?

5) If the Alta Vista day-care center opens based on Mr. Schaefers current plan, do you predict that it will succeed or fail?

AutoSave OFF IE Home Insert Draw Page Layout Formulas Data Review View TE v Times New Roman 10 ' ' = ab Paste V V Av I H2 fx AB D G E F Total Number of Students 25 30 20 37 2,550 1,333 700 4.583 3,400 1,867 700 5,967 4,250 2,400 700 7,350 5,383 3,200 700 9.283 60 40 40 642 782 3,801 75 50 50 835 1,010 4,957 90 60 60 1,029 1,239 6,111 111 74 74 1,300 1,559 7,724 3,126 175 239 11 2 3 4 Revenue: S 2-3 year olds ($17 per day x 250/12 x 80%) 6 4-5 year olds ($16 per day x 250/12 x 80%) 7 5 year olds ($7 per day x 250/12 x 80%) 8 Total revenue 9 Variable costs: 10 8102 Educational supplies ($3 per student) 11 8103 Recreational supplies ($2 per student) 12 12 8105 Housekeeping supplies ($2 per student) 13 8201 Administrative expense (14% of total revenue) 14 Total variable costs 15 Contribution margin (CM) 16 Fixed costs: 10 17 7000 Salaries, total 18 7103 Employee benefits 19 7201 FICA taxes 20 8001 Employee fees paid 21 8004 Staff development training oood 22 8005 Help wanted ads 23 8010 Membership in other organizations 24 8101 Medical/first aid kit supplies 25 8104 Food and beverage supplied by USDA 26 8106 Office supplies 27 8111 1 Telephone expense 28 8112 Postage 29 8401 0701 Rent 30 8402 0404 Equipment maintenance 31 3 8404 Mortgageote/loan interest 32 54 8406 Utilities, total 33 8501 General insurance 34 24 8502 Workmen's compensation 25 35 8601 Outside printing 24 36 8606 Subscriptions and publications 37 8702 Van maintenance/insurance gas 38 8706 Staff mileage 39 9402 Miscellaneous expenses 9500 Depreciation 41 Total fixed costs 42 Total variable and fixed costs 43 Operating profit (loss) 44 Weighted average CM per student 45 Number of students needed to break even 46 Round up break-even students 4,665 875 357 16 33 9 4 3 0 10 140 30 0 33 9 4 3 0 5 140 25 0 22 0 O 240 92 10 25 25 2 as 45 48 10 0 4,264 5,046 (463) 190.05 22.44 3,928 700 300 11 33 9 4 . 3 0 S 140 25 0 22 0 0 240 92 92 13 25 25 2 45 48 10 0 5,655 6,665 (698) 22 0 0 240 240 92 15 25 25 2 45 45 48 10 0 6,641 7,880 (530) 203.70 32.60 5,402 1,050 413 16 33 9 4 3 0 10 140 30 0 22 0 240 92 19 25 2 45 48 10 0 0 7,613 9,172 111 208.76 36.47 40 198.28 28.52 23 29 33 37 AltaVista ProjectAnalysis +