Fee Setting Assignment

 Fee Setting Assignment

The government benefits seminar for children and families was a major success, so Advocates for Children will carry out a similar seminar in a nearby town. The executive director has decided that this second seminar should make the highest possible amount of money. For this reason, they will not offer a reduced fee schedule, and all attendees must pay the entire fee. This seminar will happen in a smaller room than the first one did, which can only leave space for 45 trainees, at most. Here is the seminar’s proposed budget:

Proposed Seminar Budget

1. Conference room rental $175.00 $ 175.00
2. Audiovisual equipment Rental $75.00
3. 4 presenters @ $500 $2,000.00
4. 45 workbooks @ $15 $675.00
5. 45 lunches @ $12 $540.00 6. 45 coffees @ $3.50 $158.00
Subtotal $3,623.50
7. Indirect costs @ 25% of $3,622.50 $ 906.00 Subtotal $4,529.00
8. Profit margin @ 5% of $4,528.13 $ 227.00 Subtotal $4,756.00

You are the executive director. Following the checklist in Figure 11.1, perform all the computations necessary to set a fee. What will your fee be? What is your break-even point? What is your go/no-go decision point?

Fixed Costs

1. Conference room rental $175.00 $ 175.00
2. Audiovisual equipment Rental 75.00
3. 4 presenters @ $500 2,000.00
4. Indirect costs @ 25% of $3,675.00 $ 906.00
5. Profit margin @ 5% of $4,594.00 $ 227.00
Total Fixed Costs $3,383.00

Variable Costs

6. 45 workbooks @ $15 $15.00
7. 45 lunches @ $12 12.00
8. 45 coffees @ $3.50 3.50
Total Variable Costs $30.50

Breakeven point

I would put my breakeven and go/no go point at 30 attendees. I have set it lower to make up for margin or error, and when more than 30 people attend the profits will also increase. This is the revenue maximization strategy that I will use.

XP= A+BX
30P= 3,383 + 30.50(30)
30P= 3,383 + 915
30P= 4,298
P= 143

*Fee will still be set within the standard bracket.

Exercise 11.2

As the executive director of Advocates for Children, you have had a change of heart. You decide not to attempt to maximize revenues in this second seminar. You decide to exclude a profit margin in the fee computation, but you will include indirect costs. Additionally, the local United Way in the community hosting the seminar has guaranteed 45 participants. If fewer than 45 participants register for the seminar, the United Way will make up the difference. In exchange for this guarantee, the United Way has asked you to set the seminar fee as low as possible. Following the checklist in Figure 11.1, perform all the computations necessary to set a fee. What will your fee be?

Fixed Costs

1. Conference room rental $175.00 $ 175.00
2. Audiovisual equipment Rental 75.00
3. 4 presenters @ $500 2,000.00
4. Indirect costs @ 25% of $3,675.00 $ 906.00
Total Fixed Costs $3,156.00

Variable Costs

5. 45 workbooks @ $15 $15.00
6. 45 lunches @ $12 12.00
7. 45 coffees @ $3.50 3.50
Total Variable Costs $30.50

45 participants
45P = 3156 + 30.50(45)
45P = 3,156 + 1373 (rounded-up)
45P = 4549 (rounded-up)
(Divide both sides by 45)
P = $101.00 (rounded-up)

For 45 participants,the fee is $101.00 (100.63 if not rounded-up). * I chose to use the number 45 because the United Way has guaranteed that they will make up the difference if less than 45 people attend.

Reference
Martin, L. (2001). Financial management for human service administrators. Boston, MA: Allyn and Bacon.

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