Question

1.) You are planning to establish a childcare center for pre-school age children. The costs associated with income, profits and salary are estimated at $650 per week. You estimate that you will incur a cost of $25 per child per week, to cover the cost of breakfast, lunch and entertainment activities, considering that each child should bring the snacks. Considering the costs of this service in other care centers in the area, a tuition fee of $200 annuals and a payment for care of $75 per child are established. The center will operate 48 weeks per year and are not cost-incurred during the non-service weeks of the year.

A. Formulate equations for total cost and total income, per year, respectively.

B. Determine the minimum number of children to enroll and stay in care to at least recover costs.

C. Presuming that 15 children are enrolled, determine the amount of the loss or gain.

Answer 1

A) TOTAL COST = TOTAL FIXED COST + TOTAL VARIABLE COST

HERE GIVEN; VARIABLE COST = TUTION FEE + PAYMENT FOR CARE

=$200+ $75*48 =$ 3800

FIXED COST = $25 * 48 WEEKS

=$1200

TOTAL COST = $ 3800+$ 1200 =$5000

TOTAL INCOME = SALE - COST = $650 *48 - $5000

=$31200 -$5000

= $ 26200

B) HERE TO FIND THE NUMBER OF STUDENTS

NO. OF STUDENTS =TOTAL SALE VALUE/TOTAL COST

=$ 31200 / $ 5000

=6 CHILDS

AT LEAST 6 CHILDS ARE REQUIRED TO RECOVER THE FIXED COST

C) ASSUMING THE ENROLL OF 15 CHILDS:

TOTAL COST = $275*48 + $25*48 WEEKS * 15 CHILDS

= $13200+$18000 =$31200

PROFIT / LOSS = SALE VALUE - TOTAL COST

= $650*48 WEEKS *15 - $31200

= $468000- $31200

= $436800