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Revenues: Horizon School Contract Private students Total revenues Expenses: Administrative staff Teaching staff Facilities Supplies Total expenses Profit $ $ 154,500 126,500 71,000 90,000 89,000 25,000 $ 281,000 $ 275,000 6,000

Revenues: Horizon School Contract Private students Total revenues Expenses: Administrative staff Teaching staff Facilities Supplies Total expenses Profit $ $ 154,500 126,500 71,000 90,000 89,000 25,000 $ 281,000 $ 275,000 6,000

FINANCIAL ACCOUNTING
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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Almaden School of Music Company (ASM) provides instrumental music education to children of all ages. Payment for services comes from two sources: (1) a contract with Horizon School to provide private music lessons for up to 150 band students a year (where a year is 9 months of education) for a fixed fee of $154,500, and (2) payment from individuals at a rate of $115 per month for 9 months of education each year. In the 2012-2013 school year, ASM made a profit of $6,000 on revenues of $281,000: (Click the icon to view the data.) ASM conducted an activity analysis and found that teaching staff wages and supplies costs are variable with respect to student-months. (A student-month is one student educated for 1 month.) Administrative staff and facilities costs are fixed within the range of 2,000-2,500 student-months. At volumes between 2,500 and 3,000 student-months, an additional facilities charge of $3,000 would be incurred. During the last year, a total of 2,300 student-months of education were provided, 1,100 of which were for private students and 1,200 of which were offered under the contract with Horizon School. Read the requirements. Requirement 1. Compute the fixed cost per year and the variable cost per student-month using the cost information from the 2012-2013 year of operations. Fixed cost per year amount to $. Variable cost per student-month amount to $. Requirement 2. Suppose that in 2013-2014 Horizon School decreased its use of ASM to 100 students (that is, 900 student-months). The fixed contract price of $154,500 was still paid. If everything else stayed as it was in 2012-2013, what profit or loss would be made in 2013-2014? Complete the table below to calculate the profit or loss for 2013-2014 assuming that Horizon School decreased its use of ASM to 100 students (that is, 900 student-months) but that everything else stayed the same from 2012-2013. Total revenues Variable costs Total contribution margin Fixed costs Profit (Loss) Requirement 3. Suppose that at the beginning of 2013-2014 Horizon School decided not to renew its contract with ASM, and the management of ASM decided to try to maintain business as usual with only private students. How many students (each signing up for 9 months) would ASM require to continue to make a profit of $6,000 per year? (Round the required number of students up to the next whole number.) ASM would require students to continue to make a profit of $6,000 per year.
Transcribed Image Text:Almaden School of Music Company (ASM) provides instrumental music education to children of all ages. Payment for services comes from two sources: (1) a contract with Horizon School to provide private music lessons for up to 150 band students a year (where a year is 9 months of education) for a fixed fee of $154,500, and (2) payment from individuals at a rate of $115 per month for 9 months of education each year. In the 2012-2013 school year, ASM made a profit of $6,000 on revenues of $281,000: (Click the icon to view the data.) ASM conducted an activity analysis and found that teaching staff wages and supplies costs are variable with respect to student-months. (A student-month is one student educated for 1 month.) Administrative staff and facilities costs are fixed within the range of 2,000-2,500 student-months. At volumes between 2,500 and 3,000 student-months, an additional facilities charge of $3,000 would be incurred. During the last year, a total of 2,300 student-months of education were provided, 1,100 of which were for private students and 1,200 of which were offered under the contract with Horizon School. Read the requirements. Requirement 1. Compute the fixed cost per year and the variable cost per student-month using the cost information from the 2012-2013 year of operations. Fixed cost per year amount to $. Variable cost per student-month amount to $. Requirement 2. Suppose that in 2013-2014 Horizon School decreased its use of ASM to 100 students (that is, 900 student-months). The fixed contract price of $154,500 was still paid. If everything else stayed as it was in 2012-2013, what profit or loss would be made in 2013-2014? Complete the table below to calculate the profit or loss for 2013-2014 assuming that Horizon School decreased its use of ASM to 100 students (that is, 900 student-months) but that everything else stayed the same from 2012-2013. Total revenues Variable costs Total contribution margin Fixed costs Profit (Loss) Requirement 3. Suppose that at the beginning of 2013-2014 Horizon School decided not to renew its contract with ASM, and the management of ASM decided to try to maintain business as usual with only private students. How many students (each signing up for 9 months) would ASM require to continue to make a profit of $6,000 per year? (Round the required number of students up to the next whole number.) ASM would require students to continue to make a profit of $6,000 per year.
Revenues: Horizon School Contract Private students Total revenues Expenses: Administrative staff Teaching staff Facilities Supplies Total expenses Profit $ $ 154,500 126,500 71,000 90,000 89,000 25,000 $ 281,000 $ 275,000 6,000
Transcribed Image Text:Revenues: Horizon School Contract Private students Total revenues Expenses: Administrative staff Teaching staff Facilities Supplies Total expenses Profit $ $ 154,500 126,500 71,000 90,000 89,000 25,000 $ 281,000 $ 275,000 6,000
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