Harvey Sports Limited commenced trading two months ago and will provide a range of fitness activities for customers. The company operates a large purpose built premises located on the outskirts of Kitown. Facilities include a 25 metre swimming pool, two squash courts, an outdoor soccer pitch, a large fully equipped gymnasium, a multi-purpose activity hall, and an aerobics studio. The company has already made bookings for most of its facilities but has not decided what activities to run in the aerobics studio. Two proposals have been put forward, a mixed ability circuits class or a dance fitness class. Details relating to both activities are as follows:

Price charged per class 7 8 Annual insurance 12,000 12,000 Music and royalty licence fees 3.20/class 3.20/class Other facility costs (electricity, administration, etc.) 2,536 2,536 Instructor cost 50/class 3,300 /year Expected number of participants per class 25 20 Required: a) For each type of class, (i) Calculate the breakeven point in sales revenue. (8 marks) (ii) If Harvey Sports Limited requires a profit of 10,000 how many classes must be held? (6 marks) b) Assume that the price charged per class is 7 for both the mixed ability circuits and the dance fitness class. How many classes must be held for the profit earned from the mixed ability circuits class to equal the profit from the dance fitness class? (8 marks) c) The company is considering paying the mixed ability circuits instructor a fixed fee of 2,600 for the year instead of a fee per class. (i) Calculate the effect that this change will have on the breakeven point in sales revenue. (6 marks) (ii) Should the company make this change? (2