Question 1Tiny Tots Daycare Centre provides daycare for children Mondays through Fridays. Thebusiness had $140,000 of net income in 2015, when 50 students were enrolled and data forvariable costs per child and total fixed costs were as follows:Cost Schedule:Variable Costs:Lunch & snacksEducation SuppliesOther supplies (toiletries etc.)$1,000750250$2,000Fixed Costs:RentUtilitiesInsuranceSalariesMiscellaneous$20,0003,0003,00030,0004.000$60,000Required:Compute the charge per child, using the equation method.What is the contribution per child? What is the contribution margin ratio?а)b)c)Calculate Tiny Tot's break-even point in number of children and in sales dollars.d)Calculate the margin of safety in number of children and sales dollars.Given the expected enrolment of 50 children, prepare a contribution margin incomestatement for the year ended December 31, 2015, detailing the components of totalfixed costs, and clearly showing contribution and operating income.e)Assuming that normal enrollment at the Daycare Centre is 50 children; construct af)break-even chart, clearly showing the break-even point in units and sales dollars andthe margin of safety in units and in sales dollars.Assume that Tiny Tots target operating income is $156,000 per month. Calculate the8)number of children that must be enrolled for this goal to be realized. Is this a realisticgoal?h) Tiny Tots lost its lease and had to move to another building. Monthly rental for thenew building is $28,000. At the suggestion of the parents, Tiny Tots plans to take thechildren on outings. Monthly cost for the outing is $10,000. By how much should TinyTots increase monthly fees to meet the target operating income of $156,000 permonth, assuming the expected enrolment of 50 children?

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a) Compute the charge per child, using the equation method. b) What is the contribution per child? What is the contribution margin ratio? Calculate Tiny Tot's break-even point in number of children and in sales dollars. .1. dollars

a) Compute the charge per child, using the equation method. b) What is the contribution per child? What is the contribution margin ratio? Calculate Tiny Tot's break-even point in number of children and in sales dollars. .1. dollars

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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