cvp target operating income service firm snow leopard daycare 268776

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

Lunch and snacks $150

Educational supplies 60

Other supplies (paper products, toiletries, etc.) 20

Total$230

Monthly fixed costs consist of the following:

Rent $2,150

Utilities 200

Insurance 250

Salaries 2,350

Miscellaneous 650

Total $5,600

Snow Leopard charges each parent $580 per child.

Required

1. Calculate the breakeven point.

2. Snow Leopard’s target operating income is $10,500 per month. Compute the number of children who must be enrolled to achieve the target operating income.

3. Snow Leopard lost its lease and had to move to another building. Monthly rent for the new building is $3,150. At the suggestion of parents, Snow Leopard plans to take children on field trips. Monthly costs of the field trips are $1,300. By how much should Snow Leopard increase fees per child to meet the target operating income of $10,500 per month, assuming the same number of children as in requirement 2?