Please answer (b) questions 1 and 2 Joyful Journeys Music School provides privat

Question

Please answer (b) questions 1 and 2

Joyful Journeys Music School provides private music lessons for elementary students. Its operating costs are as follows:

Rent on facilities         $2,200 per month

                        Advertising                    $274 per month

                        Instrument Rent             $750 per month

                        Teaching Instruction      $40 per student

                        Books                               $5 per student

                        Other Costs                      $3 per student

Joyful Journeys charges $100 per student per month.

(a)        Determine the company’s break-even point in (1) number of students taught per month and (2) dollars.

(b)        Joyful Journeys has just received notice that the rent on their facilities will be increasing by $500 per month and the instrument rent will also be increasing $20 per month.

(1) Determine the company’s break-even point in the number of students taught per month based on the new information.  

(2) Determine the amount to charge per student if Joyful Journeys does not increase the number of students taught.

Explanation / Answer

Revenue Per Student 100.00 Less: Variable Cost Per Student Teaching Instruction 40.00 Books 5.00 Other Costs 3.00 Total Variable Cost 48.00 Contribution Margin per Student 52.00 Contribution Margin Ratio 52.00% (52/100) Fixed Cost Per Month: Rent on Facilities 2200 Advertising 274 Instrument Rent 750 Total Fixed Cost 3224 A Break Even Point: Fixed Cost Per Month: 3224 Contribution Margin Ratio 52.00% Break Even Point in Dollars 6200 (3224/52%) Fixed Cost Per Month: 3224 Contribution Margin per Student 52.00 Break Even Point in No of Student 62.00 (3224/52) B Fixed Cost Per Month: Rent on Facilities 2700 Advertising 274 Instrument Rent 770 Revised Fixed Cost 3744 1 Revised Fixed Cost Per Month: 3744 Contribution Margin per Student 52.00 Break Even Point in No of Student 72.00 (3744/52) 2 Revised Fixed Cost Per Month: 3744 Variable Cost (62*48) 2976 Total Cost 6720 Number of Students 62.00 Charge Per Student 108.39 (6720/62)

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