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Paul S. Gordon plans to open a day care centre for young children at the beginning of next year. He recently has arranged to rent a building and has estimated that the following annual costs will be required to operate the centre.

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Salaries for three teachers              $46,000

Salaries for two assistants               $16,000

Rent                                                 $16,000

Utilities                                              $3,600

Miscellaneous                                    $2,400

Supplies                                   $40 per child

Meals and Snacks                   $380 per child

Based on the space in the building and the three teachers available, Gordon believes that the maximum number of children that can be cared for is 120.


  • Assume the day care centre can attract 120 children when it opens. Determine the annual fee per child that must be charged in order for the centre to break even financially.
  • If Gordon decides that he wants to earn an annual before tax profit of $30,000 from the centre how much must he charge each child. Assume 120 children are admitted.
  • If Gordon decides that he wants to double his before tax profit of $30,000 from the centre how much must he charge each child. Assume 120 children are admitted.
  • If Gordon decides that he wants to earn an annual before tax profit of $15,000 and offer five full free scholarships to the children of his staff. How much each child pay?
  • If the five children of his staff are not entitled to free supplies, meals and snacks, but are but get a 100% waiver on fees, how much must other children pay? An annual before tax profit is $15,000

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  • If Gordon wants to offer five 50 % tuition scholarships to the children of his staff, how much each child pay? An annual before tax profit is $15,000 and not entitled to free supplies, meals and snacks

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