FIN -Executive Education Group (EEG) case

To determine break-even point (BEP), managers must examine the fixed and variable costs (expenses) in relation to returns. When expenses and revenues are even, this is known as the BEP. An accurate BEP for a product or service can help managers make modifications to increase profitability, assess the risk of a venture or choose between two viable options.To complete the assignment for this module, read the following scenario:The Executive Education Group (EEG) is a for-profit provider of non-degree short-courses for the general local population of middle- and senior-managers, mainly of two-day duration, with an occasional one-day course.EEG has three people on permanent staff promoting and administering the programs, with annual salaries of $200,000 per annum in total. They have two seminar rooms in which to run their programs, and together with their offices, they have a total floor space which costs them $150,000 per annum.Occasionally, EEG is asked to develop proposals for delivering tailored two-day programs ‘in-house’ for specific organizations. Costs involved with promoting and delivering such programs have been estimated as being:• Where local presenters are used, fees payable to presenters are $1,200 per day• Where special presenters are brought in from overseas (averaging 20% of all courses run), presenter fees are $2,000 per day, with the additional costs of travel and accommodation (averaging $2,000 per program)• Participant folders and materials cost $20 per participant• Lunches are provided, with preparation and cleanup being contracted out – the provider has agreed to a contract that specifies a fixed cost per lunch per day of $200 plus $10 per participant• End-of-program drinks are usually held at the end of a program, costing $200 for the wine and associated ‘finger-food’• Twice each year there is a general mail-out advising the up-coming schedule of programs, and this costs $5,000 each time• Programs generally have a price to participants of $500 per day where local presenters are used, and $600 per day where interstate or overseas presenters are usedRequired:Looking directly at the fixed costs attributable to each program, calculate the break-even point in terms of number of participants per program for the following two scenarios –a) Where overseas presenters are used (averaging 20% of all courses run)b) Where no overseas presenters are usedc) Briefly comment on what these two results might suggest.a) Assuming no overseas presenters are used during the year, and 30 courses run during the year, how many participants are required per course for EEG to break even after allowing for ALL its costs?b) Briefly comment on what the results for part 1 and part 2 might suggest