Resolution Case
Resolution case “Abbington Youth Center”
Lidia Blandolino
Anna Clara Cucinelli
Antonina Navarra
Antonia Iero
1) What assumptions are implicit in Mr. Thomas’s determination of a breakeven point?
His first assumption Is that Abbington Youth Center, being a Non-profit organization, doesn’t need a profit, so he calculated the breakeven point with a profit that is equal to 0 ( total revenue=total costs).
His second assumption is that he doesn’t take in consideration the differences among the three programs but he computes the breakeven point using the averages( fees per student and variable costs per student) of the center.
He didn’t point out from the beginning that he included salaries in the fixed costs.
His third assumption is that the fixed costs don’t change increasing the numbers of student. On the other hand, the increase of the number of student brings the cost of new teachers’ salaries, these are called step-function costs ( we consider them fixed because the relevant range is quite large) .
He doesn’t take in consideration the increase in costs for the Center of about 5 percent in educational supplies and food. He didn’t fix higher fees even if they are about 10 percent below what other Center were charging.
2) Calculate a breakeven point for each of the three programs
We composed a table wherein calculated the total fixed cost and the Unit contribution margin to determine the breakeven point for each program.
EXHIBIT 1: BREAKEVEN POINT FOR EACH OF THE THREE PROGRAMS
Infants and Toddlers
Preschool
After- School
Program fixed costs
130.000
118.000
80.000
+ Allocated fixed costs
42.675
51.210
76.815
TOTAL FIXED COST
172.675
169.210
156.815
Fee per student
4.520
5.320
5.970
-Variable cost per student
480
1.040
896
UNIT CONTRIBUTION MARGIN
4.040
4.280
5.074
BEP*(N. of students)
43
40
31
* BEP = Total fixed costs (Fee per student(or price) – Variable cost per student)
3) What is the new breakeven volume for the
Lidia Blandolino
Anna Clara Cucinelli
Antonina Navarra
Antonia Iero
1) What assumptions are implicit in Mr. Thomas’s determination of a breakeven point?
His first assumption Is that Abbington Youth Center, being a Non-profit organization, doesn’t need a profit, so he calculated the breakeven point with a profit that is equal to 0 ( total revenue=total costs).
His second assumption is that he doesn’t take in consideration the differences among the three programs but he computes the breakeven point using the averages( fees per student and variable costs per student) of the center.
He didn’t point out from the beginning that he included salaries in the fixed costs.
His third assumption is that the fixed costs don’t change increasing the numbers of student. On the other hand, the increase of the number of student brings the cost of new teachers’ salaries, these are called step-function costs ( we consider them fixed because the relevant range is quite large) .
He doesn’t take in consideration the increase in costs for the Center of about 5 percent in educational supplies and food. He didn’t fix higher fees even if they are about 10 percent below what other Center were charging.
2) Calculate a breakeven point for each of the three programs
We composed a table wherein calculated the total fixed cost and the Unit contribution margin to determine the breakeven point for each program.
EXHIBIT 1: BREAKEVEN POINT FOR EACH OF THE THREE PROGRAMS
Infants and Toddlers
Preschool
After- School
Program fixed costs
130.000
118.000
80.000
+ Allocated fixed costs
42.675
51.210
76.815
TOTAL FIXED COST
172.675
169.210
156.815
Fee per student
4.520
5.320
5.970
-Variable cost per student
480
1.040
896
UNIT CONTRIBUTION MARGIN
4.040
4.280
5.074
BEP*(N. of students)
43
40
31
* BEP = Total fixed costs (Fee per student(or price) – Variable cost per student)
3) What is the new breakeven volume for the