Service Line Break Even Analysis Memo

The proposed costs to operate this new facility are as follows:

Expected Monthly Revenue (Membership Fee): $125 per person

Monthly Fixed Costs

• Utilities: $590
• Health/Wellness Staff: $2,500
• Arts/Crafts Staff: $2,000
• Supplies: $800
• Fitness Equipment Maintenance Contract: $200

Variable Costs

• Monthly Lunch Cost: $25
• Monthly Breakfast Cost: $15

Based on the information above, once the minimum threshold of participants is reached, the initial investment to establish the center is $317,880. The organization anticipates that it will generate $46,920 of net revenues in the first year, $68,166 in the second year, $93,404 in the third year, $123,287 in the fourth year, and $158,573 in the fifth year.

1. Perform the break-even analysis to determine how many seniors would need to have a full monthly membership for UMGC Home and Community-Based Services to cover its monthly expenses.
2. Calculate the payback period to determine how long it will take for the organization to recover its initial investment of establishing the senior multipurpose center.