HCAD 640 UMGC Maryland Home and Community Memorandum – Description
Break-Even Analysis Description and Solutions
Description
Overview
Maryland Home and Community-Based Services (MHCBS) is considering a major expansion that will enable it to attract a different clientele to its organization. Currently, they serve only 34% of the frail elderly seniors and persons with disabilities in the local area. The new chief executive officer (CEO) would like the organization to expand its revenue stream by investing in a multipurpose center serving healthy seniors by offering them arts and crafts and health and wellness programs. The center will also contain an Internet café offering nutritious breakfast and lunch options.
The CEO commissioned a needs assessment based on the following:
Approximately 120 seniors in the local community are interested in this center.
The CEO expects growth of the aging population to be at least 10% each year.
Cost growth across all areas of expenses is expected to rise by 5% each year.
The CEO has presented the proposal and financial information to the BOD, and they have advised the CEO that they are in full support of the strategy if the program is a benefit to the community and the organization can recoup its investment in five years.
Proposed revenue and costs to operate this new facility are as follows:
** Monthly Revenue
– Membership Fee: $125
** Monthly Fixed Costs
– Utilities: $590
– Health/Wellness Staff: $2,500
– Arts/Crafts Staff: $2,000
– Supplies: $800
– Fitness Equipment Maintenance Contract: $200
** Monthly Variable Costs
– Breakfast: $15
– Lunch: $25
Net Revenue/Cash Flow for Years 1 through 5
Based on the bullet points above, once the minimum threshold of participants is reached, the initial investment to establish the center is $317,880. The new organization anticipates that it will generate $46,920 of net revenues in the first year, $68,166 in the second year, $93,404 in the third year, $123,287 in the fourth year, and $158,573 in the fifth year.
The post HCAD 640 UMGC Maryland Home and Community Memorandum first appeared on .
