Preschool Break Even Analysis

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Objective:

To create a break-even analysis to justify increasing program quality and to evaluate your analysis.

Scenario:

As a child care center director, you are constantly looking for the perfect balance between charging tuition rates that families can afford and those that will ensure your center is profitable. Your rates are on par with comparable centers in the area, and you have decided to offer other financial incentives to encourage families to enroll. Your current monthly fixed expenses are $10,500—this includes your salary, the salary of the cook and maintenance workers, rent, utilities, and insurance. Your variable costs are $4,000 for each of the three preschool classrooms. Each classroom is expected to enroll 18 children. You decide to limit the classrooms to 16 children, lower than any competitor, to entice more families to enroll. Your board asks you to prepare a break-even analysis to determine how much tuition would need to increase to offset this loss of enrollment.
1. Make a spreadsheet showing your current breakeven point when you have 18 children in the classroom and the breakeven point at 16 children per classroom. How much would tuition have to increase to break even?

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