Let’s Learn! Child Center operates from Monday through Friday. Let’s Learn! prov

Question

Let’s Learn! Child Center operates from Monday through Friday. Let’s Learn! provides childcare and educational services for inner-city kids between the ages of nine months and five years. Let’s Learn! has fixed staff expenses of $26,000 per week. Rent for the organization costs $5000 per week and utilities and other fixed costs total $3000 each week. Let’s Learn! charges parents $8 per day for each child who attends the program. The city pays the organization $30,000 per week out of its early childhood education fund. It costs Let’s Learn! $3 per day for supplies and snacks for each child. The Center also offers an optional early-reading program for children over the age of three. Parents pay an additional $4 per day to enroll a child in the reading program. It costs the center an additional $5 per day for each child in the program. Thirty percent of the children attending the center are enrolled in the reading program. How many children have to come to Let’s Learn! each week for it to break even?

Explanation / Answer

Fixed costs:

= 5000+26000+3000-30000

= $4,000

Contribution per student:

= $8-$3

= $5

Contribution for reading student:

= $8-$3+$4-$5

= $4

Weighted contribution:

= $5×70%+$4×30%

= $4.7

Number of students for breakeven:

= $4000÷$4.7

= 851 students

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