Richmond baking School teaches students how to become good cake designers. The following relates to the income and costs analysis for the school for 2017

Fees charged:

Senior cake design Class - $75 per class per student

Costs

Resources - $200 per senior students.

Teacher - $35,000 per annum (there are 2 teachers in the school)

Class Consumables (such as whiteboard markers, worksheets) - $30 per student

Administrative Expenses - $40,000 per annum

Finance Costs - $8,000 per annum

There are 40 lessons in a school year for both senior and junior levels.

Suppose there are 50 senior students enrolled. Each class is made up of 8 students and school fees are not refundable.

Extra Information

How many junior students are enrolled?  50

How much is collected from them? Question is incomplete. That’s the point you have to calculate it from the “Fees charge " information

The school plan for 2017 is to accept both senior and junior students next year.

1- Prepare a CVP income statement using the contribution margin format in 2017. 

2- How many students are needed in order to achieve breakeven in 2017. 

3- How many classes need to be taught in order to achieve breakeven in 2017. 

4- Suppose the business wants to achieve $25,000 profit at the end of the year, calculate the number of classes is needed to achieve this in 2017. 

5- Calculate the margin of safety (in a number of classes). There are 50 students enrolled for next year’s course. 

6- Explain what is margin of safety