Beth Durham opened Beth’s Corner, a small day care facility, just over two years ago. After a rocky start, Beth’s Corner has been thriving. Durham is now preparing a budget for November 2012.
Monthly fixed costs for Beth’s Corner are
Rent ...........................................     $ 800
Salaries ......................................     1,400
Other fixed costs ......................        100
Total fixed costs .......................   $2,300

The salary is for Ann Page, the only employee, who works with Beth and cares for the children. Durham does not pay herself a salary, but she receives the excess of revenues over costs each month.
The cost driver for variable costs is “child-days.” One child-day is one day in day care for one child, and the variable cost is $10 per child-day.
The facility is open from 6:00 am to 6:00 pm weekdays (that is, Monday through Friday), and there are 22 weekdays in November 2012. An average day has eight children attending Beth’s Corner. Provincial law prohibits Beth’s Corner from having more than 14 children, a limit it has never reached. Durham charges $30 per day per child, regardless of how long the child is at the facility.

1. What is the break-even point for November in child-days? In revenue dollars?

2. Suppose attendance for November 2012 is equal to the average, resulting in 22 × 8 = 176 child-days. What amount will Durham have left after paying all her expenses?

3. Suppose both costs and attendance are difficult to predict. Compute the amount Durham will have left after paying all her expenses for each of the following situations. Consider each case independently.
a. Average attendance is nine children per day instead of eight, generating 198 child-days.
b. Variable costs increase to $12 per child-day.
c. Rent increases by $220 per month.
d. Durham spends $300 on advertising (a fixed cost) in November, which increases average daily attendance to 9.5 children.
e. Durham begins charging $33 per day on November 1, and average daily attendance slips to seven children.