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Question - Corona Ltd proposes running summer camps for children. The variable costs per child per week are:
Food Rs.18.00
Direct labour Rs.15.00
Variable overheads Rs.7.00
Additional information:
The fixed overheads will be Rs.20, 000 for the five weeks when the summer camp runs. The maximum number of children that the camp could accommodate is 200. The company intends marketing the holidays at Rs.117 per child per week, and they estimate that 150 children will take part in the camps each week.
REQUIRED -
a) What is the anticipated profit based on the above projections?
b) How many holiday weeks will have to be sold over the five weeks in order for the venture to break even?
c) What is the margin of safety in units and in percentage terms?
d) The directors know that on average most children will attend for one week only. The only way to entice parents to send them for a second week is to offer a reduced rate to children returning for a second week.
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