Edelweiss Youth CenterElyes LAFON, a recently graduated from MIAAC, had been hired three months ago as assistant director of the Edelweiss Youth Center. Prior to earning his Master, he had worked in several manufacturing firms, but he had never worked in a nonprofit organization. He knew little about Edelweisse's programs or the educational and social theories in use by the professional staff but had decided to take the job since he had been impressed with the Center's attempts to provide high$-$quality programs for the children in his community.Despite his lack of experience in organizations like Edelweiss, Mr$.$ LAFON had brought some much$-$needed management skills to the center's operations. In his short tenure he not only had introduced some new management techniques but had regularly made attempts to educate the professional staff in the use of those techniques.This afternoon's staff meeting was no exception. In attendance would be the center's director, Suzy Clarck, and the coordinators of the center's three programs: Lina Meulen $($Infants and Toddlers Program$),$ Diana Mercle $($Preschool Program$),$ and Oliver Twist $($After$-$School Program$).$As the names suggested, each program was aimed toward a different age$-$group: the first accepted children up to the age of three; the second from three to five years of age; and the third from five toseven years.Mr$.$ Lafon planned to instruct the program directors in the concept of breakeven analysis; in order to do so$,$ he had gathered some data on the revenues and costs of the three programs $($see Exhibit $1).$ Using this information, he determined that each student contributed $$4,348$ to fixed costs after covering his or her variable costs. Given the fixed costs of $$498,700($$$328,000$ in the programs and $$170,700$ for the center overall$),$ he had calculated that $115$ students were needed to break even.He had prepared the breakeven chart, shown in Exhibit $2,$ which he planned to distribute to everyone at the meeting prior to giving a short lecture on the concept of breakeven analysis. His intent was to make clear to everyone that enrollment was exactly at breakeven, which did not allow any margin of safety, and to encourage the program directors to expand the size of their programs by a few students each so as to provide a more comfortable margin and, if all went well, a substantial surplus for the center.The MeetingAt the meeting, several issues arose that Mr$.$ Lafon had not anticipated, and a rather hostile atmosphere developed. Ms$.$ Meulen pointed out that $50$ students was the maximum her program could accommodate, given current classroom space, and wondered exactly how Mr$.$ Lafon expected her to increase the program's size. Ms$.$ Mercle said she would be happy to expand her program by another $10$ students, but in order to do so$,$ she would need to hire another teacher, at a cost of $$22,000.$ She wondered how Mr$.$ Lafon might include this fact in his analysis, and, under the circumstances, whether the teacher should be considered a fixed or a variable cost. Mr$.$ Twist told Mr$.$ Lafon that he had been planning all along to add another $15$ students to his program and wondered why Mr$.$ Lafon had not checked with him about this prior to preparing the figures and the chart. He too would need to hire another teacher, however, at a cost of $$25,000,$ and also wondered whether this was a fixed or variable cost.Ms$.$ Clarck seemed quite perplexed by the discussion and began her comments by asking Mr$.$ Lafon why he was using averages when the Center had three separate programs. She also indicated that $$1,350$ was far too low a surplus, since she was hoping to have some extra money available during the year for painting and some minor renovations, which would cost about $$10,000.$ She asked Mr$.$ Lafon how he might incorporate this need into his analysis. She also expressed some concern about Mr$.$Lafon's per$-$student fees, stating that in talking with people in other centers she had learned that Edelweiss's fees were about $10$ percent below what others were charging. She thought an across$-$the$-$board increase to make up the difference was called for.Finally, all three program directors queried Mr$.$ Lafon about his variable$-$cost$-$per$-$student figure. They asked him how he had derived these figures and whether they included some recent price increases of about $5$ percent in educational supplies. Mr$.$ Lafon stated that they included both supplies and food, divided about $75$ percent$/25$ percent between the two, but he confessed that he had not included any price increase in his calculations.Next StepsThe meeting ended on a less$-$than$-$happy note. Mr$.$ Lafon had not had an opportunity to give his lecture, the program managers felt frustrated that their concerns and plans had not been included in his analysis, and Ms$.$ Clarck was quite upset because it appeared as though the center would not have the funds necessary to pay for the much$-$needed painting and renovations.Mr$.$ Lafon returned to his office and wondered whether his decision to work at the center had been a wise one. Perhaps, he thought, life would be simpler in a manufacturing firm.Assignmet

$1.$ What assumptions are implicit in Mr$.$ Lafon's determination of a breakeven point?$2.$ Using the data in Exhibit $1,$ calculate a breakeven point for each of the three programs?$3.$ On the basis of the suggestions and comments made at the meeting, and making assumptions where necessary, prepare revisions to Exhibit $1.$ What is the new breakeven volume for the Center? What is it for each of the three programs?$4.$ Based on the information in Exhibit $1,$ Ms$.$ Clarck is considering eliminating the After School Program. What advice would you give her?Exhibits $1$ and $2$ on the next page.