Computation of Break-Even Equations
1. The Center for Shaker Crafts (CSC) is thinking about bringing a new exhibit to the Center. It will cost the Center $30,000 to bring the exhibit to town, an additional $12,000 for lighting and security equipment, and $5,500 for an insurance policy. The manager of the Center thinks she can charge $12 per person to see the exhibit; she estimates that 350 people per day will come to see the exhibit. If the total costs for additional security guards, power, and added custodial services are 1,500 per day, how many days will the exhibit need to be at the Center in order to cover the costs?
2. A Greener World expects to have $15,000 in fixed costs. If its fixed costs do not change but the amount each marcher raises through pledges declines from $55 to $50 and its variable cost/unit increases from $25 to $30, how much will its break-even quantity increase?
3. The Helensville Symphony incurs $3,000,000 of fixed cost each year. The variable cost for each person attending one of the orchestra's performances is $24. If the average charge for a ticket to attend a performance of the Helensville Symphony is $100, how many tickets must it sell each year to break even?
4. Kids Early Start (KES) operates from Monday to Friday. KES provides childcare and educational services for inner-city kids between the ages of 3 months and 5 years. It has fixed expenses of $35,000 per week and charges parents $15 per day for each child who attends the program. A city contract pays the center $25,000 per week. It costs KES $5 per day for supplies and snacks for each child. KES also offers an optional early-reading program for children over the age of 3. Parents pay an additional $3 per day to enroll a child in the reading program. It costs KES an additional $4 per day for each child in the program. Thirty percent of the children attending KES are enrolled in the reading program.
How many children have to come to KES each week for it to break even?
If the percentage of children in the reading program rises from 30 to 35 percent, the break-even level increases, decreases, stays the same?
5. You are given the following information about We-Save-Um Animal Rescue (WSU):
Number of dogs rescued and placed by WSU-600
Average length of stay for a dog-10 days
Daily cost of feeding one dog-$.90
Number of veterinary visits per dog-1.2
Cost per veterinary visit-$35
Cost of spay/neuter and transportation per dog rescued-$45
Cost of the kennel and related equipment-$300,000
Useful life of the kennel and related equipment-20 years
WSU uses straight-line depreciation.
Salvage value of the kennel and related equipment-$0
WSU has three full-time employees-an executive director who earns $40,000 per year, an evaluator/trainer who earns $30,000 per year, and a kennel manager who earns $25,000. Fringe benefits equal 25 percent of each employee's annual salary.
WSU expects to place all of the dogs that it takes into the program by the last day of the fiscal year. It charges an adoption fee of $225 per dog. Experience has shown that 15 percent of the people elect to make an additional donation to WSU at the time of adoption. Historically, these extra donations have averaged $200. In addition, WSU has an active fundraising program and expects to raise $40,000 in donations during the fiscal year.