Min & Lin own Little Me, a private art school. Parents pay a drop-off fee of $30 per child for a full day. Students are engaged in various arts activities. The business is open for an average of 22 days each month. LittleME expected costs and revenue for the next year: $30 per student per day 20 students per day Break-even analysis is a popular examination topic. Therefore, it is important that you are able to accurately construct and interpret information shown in a break- even chart. Perhaps more importantly, you must be able to modify a break-even chart and analyse its implications for a business. Price Current Capacity (maximum number of students possible to teach) Estimated Demand Lesson Materials Rent Insurance Salaries Utility bills 80% of capacity $12 per student $1500 per month $140 per month $1400 per month $200 per month (a) Calculate the sum of the fixed costs (show all your calculations)[2 marks] (b) Calculate the break-even quantity per month.(show all your calculations) (2 marks] (c) If the business operates at 80% of its capacity, calculate the monthly margin of safety. (show all your calculations) [2 marks] (d) Construct a fully labelled month break-even chart for Little ME. [5 marks] Insert hand-drawn image here (not rotated) (see question e before you paste the image) (e) Identify the break-even point, the break-even quantity and the margin of safety on your chart. (on the chart above) [3 marks) (f) Examine strengths and weaknesses of using break-even analysis for a business such as LittleME. [4 marks] Min & Lin own Little Me, a private art school. Parents pay a drop-off fee of $30 per child for a full day. Students are engaged in various arts activities. The business is open for an average of 22 days each month. LittleME expected costs and revenue for the next year: $30 per student per day 20 students per day Break-even analysis is a popular examination topic. Therefore, it is important that you are able to accurately construct and interpret information shown in a break- even chart. Perhaps more importantly, you must be able to modify a break-even chart and analyse its implications for a business. Price Current Capacity (maximum number of students possible to teach) Estimated Demand Lesson Materials Rent Insurance Salaries Utility bills 80% of capacity $12 per student $1500 per month $140 per month $1400 per month $200 per month (a) Calculate the sum of the fixed costs (show all your calculations)[2 marks] (b) Calculate the break-even quantity per month.(show all your calculations) (2 marks] (c) If the business operates at 80% of its capacity, calculate the monthly margin of safety. (show all your calculations) [2 marks] (d) Construct a fully labelled month break-even chart for Little ME. [5 marks] Insert hand-drawn image here (not rotated) (see question e before you paste the image) (e) Identify the break-even point, the break-even quantity and the margin of safety on your chart. (on the chart above) [3 marks) (f) Examine strengths and weaknesses of using break-even analysis for a business such as LittleME. [4 marks]
