Question
Question D1 Caring Love is a registered non-profit organization and manages a nursing home concerned with the welfare of elderly and disable people. An in-house
Question D1
Caring Love is a registered non-profit organization and manages a nursing home concerned with the welfare of elderly and disable people. An in-house reflexology center has recently been opened and permanent staff engaged. Estimates have been prepared as follows:
Fixed overheads: RM
Salary and wages | 24,800 per annum |
Rent Insurance | 13,200 per annum 2,000 per annum
|
Variable overheads: Massage oils Heating costs |
14 per resident per week 11 per resident per week |
Soap bars | 10 per resident per week |
The center can accommodate no more than 50 residents and it is proposed to charge each resident RM60 per week.
Required:
-
- Assuming the center is fully occupied each week
- How many weeks must the center be opened each year to break-even?
(4 marks)
- If the center were to open for 40 weeks in the year, what price would have to be charged to each resident to break-even? (5 marks)
b) If the average occupancy were only 32 residents per week at RM60 each
(i) How many weeks must the center to open to break-even? (4 marks)
(ii) What profit/loss would be incurred if the center opened for 40 weeks
(4 marks)
c) Identify 2 limitations that break-even analysis may have in the above situation.
(3 marks)
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