Chapter 3, Problem 3.39P

CVP, target operating income, service firm. Spotted Turtle provides daycare for children Mondays through Fridays. Its monthly variable costs per child are as follows:

Lunch and snacks	$130
Educational supplies	75
Other supplies (paper products, toiletries, etc.)	35
Total	$240

Monthly fixed costs consist of the following:

Rent	$2,100
Utilities	400
Insurance	250
Salaries	1,400
Miscellaneous	650
Total	$4,800

Spotted Turtle charges each parent $640 per child per month.

1. 1. Calculate the breakeven point.

  Required

1. 2. Spotted Turtle’s target operating income is $10,800 per month. Compute the number of children who must be enrolled to achieve the target operating income.
2. 3. Spotted Turtle lost its lease and had to move to another building. Monthly rent for the new building is $3,500. In addition, at the suggestion of parents, Spotted Turtle plans to take children on field trips. Monthly costs of the field trips are $2,500. By how much should Spotted Turtle increase fees per child to meet the target operating income of $10,800 per month, assuming the same number of children as in requirement 2?