Dan Schaefer, executive director of the Petersburg, Va., office of the Volunteers of America (VOA), is eager for the board of directors to approve his plan to open a day-care center in the Alta Vista housing community. Mr. Schaeferbelieves this proposal is an ideal way to begin to rebuild Alta Vista. The Petersburg VOA helped to establish this community in 1971; unfortunately, the residents have seen a rise in criminal activity and a decrease in their quality of life. Although the board approves Mr. Schaefer’s proposal at the end of the case, assume instead that he has hired you to analyze the proposal in preparation for the board meeting. Specifically, Mr. Schaefer wants you to do the following:

Prepare a cost-volume-profit (CVP) analysis of the proposal’s financial implications. Specifically, prepare an analysis that includes the projected revenue, variable costs, and fixed costs for enrollment levels of 20, 25, 30 and 37 students using the monthly projections in Attachment A of the case. Then, compute the weighted average contribution margin (CM) per student (computed as the total CM divided by the number of students enrolled) and the number of students that need to enroll at each of the four levels of enrollment for the center to break even. For this analysis, I have provided an Excel template in which I have already sorted variable and fixed costs; I have included the raw data. However, I have not included the formulas.
Prepare a memorandum for Mr. Schaefer that includes:

the benefits and challenges of the Alta Vista day-care center project
an interpretation of the results of your CVP analysis
recommendations for Mr. Schaefer about what he should consider and/or do before the board meeting

Required:
a. What does the Petersburg office hope to achieve by opening the Alta Vista day-care center? In other words, what type of program has Mr. Schaefer planned, and why does he think it would benefit both the Petersburg office and Alta Vista?
b. What challenges does the company face in opening the day-care center? Where do the uncertainties lie? How could these individuals or organizations mitigate the challenges and uncertainties that you identify?
c. How would you describe the cost structure of the Alta Vista day-care center? In other words, what costs from Attachment A can be managed; can the center avoid any of the variable or fixed costs? What costs are missing from Attachment A, if any?
d. What is the break-even number of students needed to enroll without the administrative fee to the VOA office? Should the office charge this fee to the day-care center in the short term? In the long term? Is charging the fee consistent with the VOA’s mission?