- Unemployment among high school graduates is quite high due to a recession. City Community College is considering a new program to help young people get the training they need to be more employable. The college has collaborated with the municipal hospital to build a nurse’s aide program, a 1-year program that would lead to immediate employment. Initial financial analysis indicates that the total fixed cost of the program will be $200,000, which includes the cost of a 1-year rental of the facilities plus utilities, insurance, and administrative costs. The variable cost and step cost together are $10,000 per student, which pays for faculty salary, student lunches, and teaching materials and textbooks. The state kicks in $5,000 per student, and the tuition based on market analysis is $6,000. Given that the nurse’s aide program has never been offered in the region before and will be under financial pressure due to current funding cuts, the college’s board of trustees would like to know how many students would need to be enrolled for the program to break even. The board also wants to know what other options it will have to mitigate these financial issues if the expected enrollment is below the breakeven point, given the high profile of the program at a time when employment and economic recovery are critical. Consider two possibilities: (1) Funding is limited to $100,000, or (2) with the benefit of efficiencies, variable and step costs can be reduced to $9,500. You are required to do a financial analysis of the proposed program. Please provide a spreadsheet solution and a written explanation of your approach.
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