Hi, I need help with the required A-D. I need to show my work but do not understand how to get the breakeven point.
CASE 4-2 MAYFIELD SOFTWARE During 2010, the group conducted 850 day-long classes CUSTOMER TRAINING [LO 3] with an average enrollment of 20 students paying $360. The group's Report of Operating Results for 2010 is Marie Stefano is the group director of customer training for detailed above Mayfield Software. In this capacity, she runs a center in Kirkland, Washington, that provides training to employees of companies that use Mayfield's inventory control, cus- Additional Facts 1. All equipment is leased on a yearly basis. Costs include tomer management, and accounting software products. 100 workstations for students fone workstation for Her group employs a receptionist and an office manager/bookkeeper and she has arrangements with sev every seat in each of the four 25-student classrooms). eral part-time trainers who are hired on an as-needed basis. plus servers and other miscellaneous equipment. While average class enrollment is 20 students, some classes are (They are all retired employees of Mayfield Software.) Trainers are paid $4,000 per daylong class. Mayfield is a full (25 students and classes are cancelled if enrollment decentralized company, and Marie is given considerable is fewer than 15 students. Classes typically are held authority to advertise and conduct classes as she sees fit. Monday through Friday, although some classes are held on Saturdays and Sundays. Report of Operating Results, 2010 2. Rent relates to the training center in Kirkland, which is Revenue 56,120,000 not part of Mayfield's main campus located in Bellevue Less operating costs: Washington Trainer costs $3,400,000 3. Advertising costs relate to the cost of monthly advertise Director salary 180,000 ments in trade journals such as Tech Worker and Receptionist 60,000 Inventory Management. These ads provide information office manager 80,000 on upcoming training sessions Utilities, phone, etc. 38,000 4. Operating manuals are provided to each participant. Lease expense related to computers, servers, etc. 5. Postage, envelopes, and paper costs relate primarily to 400,000 biling companies for employees who participate in Rent 100,000 Operating manuals for classes. This cost varies with the number of participants. participants 510,000 6. Central charges are assigned to each group at Mayfield Postage envelopes, paper etc. 12.750 Software based on actual sales. The allocation relates Advertising 160,000 to costs incurred for the benefit of the company as a Total operating costs 4,940,750 whole, including salaries of the CEO and company Profit before central charges 1.179.250 president legal costs, costs related to the company's Central charges 1.224,000 central office building, brand advertising, and so on. Group profit $44.750) The charge is 20 percent of revenue. 163 Required a. As indicated, the training group suffered a loss in 2010. Thus, unbeknownst to Marie, Mayfield management is con sidering shutting down the training center. Given the results of 2010, what would be the effect on Mayfield Software's total company profit in 2011 If the training cen- ter is closed at the start of the year? b. Given the current room configuration and approach to allocation of central charges (20 percent of revenue), calcu late the number of classes that must be offered (with an average enrollment of 20 students) for Marie's group to break even on the Report of Operating Results c. Recalculate your answer to part bassuming Marle can lower the amount paid to instructors to $3,500 per class. Should Marie seriously pursue this option? d. Mayfield Software is releasing version 4.0 of Customer Track in 2011. Marie believes that this will cre. ate a demand for 30 additional daylong classes with an average enrollment of 20 students per class. What effect will this have on group profit on Marie's Report of Operating Results? Assume instructors will be paid $4,000 per class
