Sabrri Spa offers a variety of skin treatments and spa services, including massages, facials, body treatments, and manicures. The spa is owned by the largest dermatology practice in town, and the doctors invested $450,000 to start the spa five years ago. The spa is in its own building next to the clinic, and it has its own staff and management, so almost all of the spas costs are direct costs.

The average one-hour treatment is priced at $100. Sabrri has the following cost structure:

	Variable Cost per Treatment		Fixed Cost per Month
Therapist	$40
Supplies	4
Management			$5,500
Laundry			X
Utilities			1,400
Rent	7		6,000
Repairs/cleaning	6		1,500
Total	$57		$Y

Assume that all treatments have the same variable cost structure depicted in the table.

Please complete the following parts

1. The costs in the table above are all direct costs associated with the spa, except laundry. The spa and clinic use shared laundry services. The total monthly budget for laundry services is $300. The cost driver is laundry loads, and the laundry services budget is based on 75 loads of laundry for the spa and clinic combined. The spas budget should be based on their anticipated use of 50 loads of laundry per month. Determine the amount of laundry cost per month that the spa should budget, and put the number in for X in the table above. Then, add up the fixed cost column and put in a number for Y in the table above.
2. Calculate the number of treatments Sabrri must perform each month in order to break even.
3. In April, the therapists are expected to perform 550 treatments. Prepare a budget for April assuming 550 treatments are given.
4. Assume some time has passed, and actual results for April are available. The spa actually performed 530 treatments and incurred the following actual costs. Prepare a variance analysis for April comparing actual performance to the simple budget based on 550 treatments that you created in Part C.

Actual Operating Results for April
Revenue			$53,000
Therapists	$21,280
Supplies	1,795
Management	5,125
Laundry	220
Utilities	1,505
Rent	9,710
Repairs/cleaning	5,080
Total Expenses			$44,715
Actual Profit			8,285

5. Explain and interpret the simple variance analysis results that you just determined.
6. Prepare a variance analysis for April comparing actual performance to a flexible budget based on the actual number of treatments performed in April of 530 treatments.
7. Explain and interpret the flexible variance analysis results that you just calculated.
8. Do the break-even calculation you performed in Part B and the budgeted and actual profits computed in Parts C, D, and F accurately capture the true economics of Sabrri, especially from the perspective of the doctors who invested in the spa? Explain why or why not.