Teddy Bear Daycare provides daycare for children Mondays through Fridays. Its monthly variable costs per child are

Lunch and snacks.............. $ 100

Educational supplies............... 75

Other supplies (paper products, toiletries, etc.) ..... 25

Total.................... $ 200

Monthly fixed costs consist of

Rent.....................$2,000

Utilities................. 300

Insurance................. 300

Salaries................. 2,500

Miscellaneous................. 500

$5,600

Teddy Bear charges each parent $600 per child.

REQUIRED

1. Calculate the breakeven point.

2. Teddy Bear’s target operating income is $10,400 per month. Compute the number of children that must be enrolled to achieve the target operating income.

3. Teddy Bear lost its lease and had to move to another building. Monthly rent for the new building is $3,000. At the suggestion of parents, Teddy Bear plans to take children on field trips. Monthly costs of the field trips are $1,000. By how much should Teddy Bear increase fees per child to meet the target operating income of $10,400 per month, assuming the same number of children as in requirement 2?