Marie Stefano is the group director of customer training and classes are cancelled if enrollment is fewer than 15 stufor Mayfield Software. In this capacity, she runs a center in dents. Classes typically are held Monday through Friday, Kirkland, Washington, that provides training to employees of although some classes are held on Saturdays and Sundays. companies that use Mayfield's inventory control, customer man- 2. Rent relates to the training center in Kirkland, which is agement, and accounting software products. Her group employs not part of Mayfield's main campus located in Bellevue, a receptionist and an office manager/bookkeeper, and she has Washington. arrangements with several part-time trainers who are hired on an as-needed basis. (They are all retired employees of Mayfield 3. Advertising costs relate to the cost of monthly advertiseSoftware.) Trainers are paid $4,000 per daylong class. Mayfield is a ments in trade journals such as Tech Worker and Inventory decentralized company, and Marie is given considerable authority Management. These ads provide information on upcoming to advertise and conduct classes as she sees fit. training sessions. 4. Operating manuals are provided to each participant. 5. Postage, envelopes, and paper costs relate primarily to billing companies for employees who participate in classes. This cost varies with the number of participants. 6. Central charges are assigned to each group at Mayfield Software based on actual sales. The allocation relates to costs incurred for the benefit of the company as a whole, including 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. REQUIRED 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 Software's total company profit in 2017 if the training center 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), calculate the number of classes that must be offered (with an average enrollment 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 group's 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? 1. All equipment is leased on a yearly basis. Costs include 100 d. Mayfield Software is releasing version 4.0 of Customertiack workstations for students (one workstation for every seat additional daylong classes with an average enrollment of 20 stuin each of the four 25-student classrooms), plus servers and dents per class. What effect will this have on "group profit" on other miscellaneous equipment. While average class en- Maries Report of Operating Results? Assume that instructors rollment is 20 students, some classes are full ( 25 students), will be paid $4,000 per class
