Question 3 The Oakland Homeless Shelter (OHS) provides temporary lodging, food and medical services for homeless citizens in the city of Oakland OHSs chief financial officer is trying to assess the monthly break even point for the shelter The shelter has monthly fixed costs of $30,000 The shelter receives $35 per individual sheltered per day from the city of Oakland and incurs $15 in variable cost per individual sheltered per day Note All questions below are independent of each other Do not carry forward any assumptions from previous questions unless the questions instructs you to do so Calculate the monthly quantity of homeless individuals OHS needs to shelter in order to break even ( note in order to ease calculations for this question and all questions below, assume that one individual who stays multiple days at the shelter counts as multiple homeless individuals, i e an individual who stays 5 days counts as 5 homeless individuals ) Fill in the blank Each individual sheltered per day above the break even quantity generates an additional surplus of $ ( hint No additional calculation needed ) Suppose that the city of Oakland requires OHS to earn a modest surplus of $2,000 per month in order to shield against sudden cost increases, temporary funding shortages or spikes in volume What quantity of individuals must OHS shelter each month to meet this surplus requirement Suppose instead that the city of Oaklands regulations prohibit homeless shelters from exceeding a monthly deficit of $1,500 (the maximum deficit any shelter can incur is $1,500 per month) What is the minimum quantity of individuals OHS must shelter each month in order to comply with this regulation Supposed instead that in addition to receiving per diem funding from the city of Oakland, OHS also receives a fixed monthly grant of $4,000 from Alameda County Re calculate the monthly break even quantity of individuals to be sheltered Suppose instead that, due to budget cuts, the city of Oakland lowers the amount paid per sheltered individual per day to $30 What is the new maximum amount of fixed costs OHS can incur each month in order to break even What financial managerial avenues can OHS pursue if it does not expect to reach its break even point in any given month In the grid below, give an example of each type of cost that might be incurred by OHS Fixed Variable Indirect Direct After further review of OHSs financial records, the CFO determines that there are actually two segments of individuals seeking shelter at OHS Ordinary Medical Care (OMC) and Advanced Medical Care (AMC) As the names would imply, AMC individuals present with poorer health conditions and require more extensive medical care than OMC individuals who typically require little beyond basic medical care OHS is able to receive more funding from the city of Oakland for the more expensive AMC segment individuals OHS faces the following financial characteristics for the two segments Segment Reimbursement from Oakland per individual per day Variable cost per individual per day of Individuals Served OMC (Ordinary Care) $35 $15 70 AMC (Advanced Care) $40 $26 30 Calculate the weighted average contribution margin per individual sheltered using the information above Fill in the two blanks Each OMC individual sheltered per day contributes $ towards paying off fixed costs or generating surplus, whereas each AMC individual sheltered per day contributes $ towards paying off fixed costs or generating surplus What is the total number of individuals that OHS must shelter each month in order to break even assuming its total fixed costs are now $50,000 per month (round to the nearest whole ) Based on your answer above, calculate the specific number of OMC and AMC individuals OHS needs to shelter each month to break even (round to the nearest whole ) Without calculating, will OHS come in above (i e surplus) or below (deficit) its break even if it actually winds up sheltering 60 OMC and 40 AMC individuals Explain briefly

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 24, 2024

Question 3 The Oakland Homeless Shelter (OHS) provides temporary lodging, food and medical services for homeless citizens in the city of Oakland. OHSs chief financial

Question 3

The Oakland Homeless Shelter (OHS) provides temporary lodging, food and medical services for homeless citizens in the city of Oakland. OHSs chief financial officer is trying to assess the monthly break-even point for the shelter.

The shelter has monthly fixed costs of $30,000. The shelter receives $35 per individual sheltered per day from the city of Oakland and incurs $15 in variable cost per individual sheltered per day.

Note: All questions below are independent of each other. Do not carry forward any assumptions from previous questions unless the questions instructs you to do so.

Calculate the monthly quantity of homeless individuals OHS needs to shelter in order to break even. (note: in order to ease calculations for this question and all questions below, assume that one individual who stays multiple days at the shelter counts as multiple homeless individuals, i.e. an individual who stays 5 days counts as 5 homeless individuals)

Fill in the blank: Each individual sheltered per day above the break-even quantity generates an additional surplus of $_______. (hint: No additional calculation needed!)

Suppose that the city of Oakland requires OHS to earn a modest surplus of $2,000 per month in order to shield against sudden cost increases, temporary funding shortages or spikes in volume. What quantity of individuals must OHS shelter each month to meet this surplus requirement?

Suppose instead that the city of Oaklands regulations prohibit homeless shelters from exceeding a monthly deficit of $1,500 (the maximum deficit any shelter can incur is $1,500 per month). What is the minimum quantity of individuals OHS must shelter each month in order to comply with this regulation?

Supposed instead that in addition to receiving per-diem funding from the city of Oakland, OHS also receives a fixed monthly grant of $4,000 from Alameda County. Re-calculate the monthly break-even quantity of individuals to be sheltered.

Suppose instead that, due to budget cuts, the city of Oakland lowers the amount paid per sheltered individual per day to $30. What is the new maximum amount of fixed costs OHS can incur each month in order to break even?

What financial/managerial avenues can OHS pursue if it does not expect to reach its break-even point in any given month?

In the grid below, give an example of each type of cost that might be incurred by OHS.

	Fixed	Variable
Indirect
Direct

After further review of OHSs financial records, the CFO determines that there are actually two segments of individuals seeking shelter at OHS: Ordinary Medical Care (OMC) and Advanced Medical Care (AMC). As the names would imply, AMC individuals present with poorer health conditions and require more extensive medical care than OMC individuals who typically require little beyond basic medical care. OHS is able to receive more funding from the city of Oakland for the more expensive AMC segment individuals.

OHS faces the following financial characteristics for the two segments:

Segment	Reimbursement from Oakland per individual per day	Variable cost per individual per day	% of Individuals Served
OMC (Ordinary Care)	$35	$15	70%
AMC (Advanced Care)	$40	$26	30%

Calculate the weighted-average contribution margin per individual sheltered using the information above.

Fill in the two blanks: Each OMC individual sheltered per day contributes $_______ towards paying off fixed costs or generating surplus, whereas each AMC individual sheltered per day contributes $_______ towards paying off fixed costs or generating surplus.
What is the total number of individuals that OHS must shelter each month in order to break even assuming its total fixed costs are now $50,000 per month? (round to the nearest whole #)

Based on your answer above, calculate the specific number of OMC and AMC individuals OHS needs to shelter each month to break even. (round to the nearest whole #)

Without calculating, will OHS come in above (i.e. surplus) or below (deficit) its break-even if it actually winds up sheltering 60% OMC and 40% AMC individuals? Explain briefly.