You run a school in Florida. Fixed monthly cost is $5,396.00 for rent and utilit
ID: 2329246 • Letter: Y
Question
You run a school in Florida. Fixed monthly cost is $5,396.00 for rent and utilities, $6,006.00 is spent in salaries and $1,475.00 in insurance. Also every student adds up to $97.00 per month in stationary, food etc. You charge $699.00 per month from every student now.
You are considering moving the school to another neighborhood where the rent and utilities will increase to $11,585.00, salaries to $6,315.00 and insurance to $2,371.00 per month. Variable cost per student will increase up to $195.00 per month. However you can charge $1,199.00 per student. At what point will you be indifferent between your current mode of operation and the new option?
Explanation / Answer
Answer
--Net Income under current mode:
Total revenues
699x
Rent
$ 5,396.00
Utilities
$ 6,006.00
Insurance
$ 1,475.00
Total Fixed Cost
$ 12,877.00
Stationery (Variable cost)
97x
Total Cost
12877 + 97x
Net Income
[699x - [12877 + 97x]
= 699x – 97x - 12877
= 602x - 12877
---Net Income under New Option:
Total revenues
1199x
Rent
$ 11,585.00
Salaries
$ 6,315.00
Insurance
$ 2,371.00
Total Fixed Cost
$ 20,271.00
Variable cost
195x
Total Cost
20271 + 195x
Net Income
[1199x - (20271 + 195x)]
= 1199x-195x-20271
= 1004x - 20271
Hence, Equation: 602x – 12877 = 1004x – 20271
>602x – 12877 = 1004x – 20271
>20271 – 12877 = 1004x – 602x
>7394 = 402x
>x = 18.39 students or 18 students. = Answer
Total revenues
699x
Rent
$ 5,396.00
Utilities
$ 6,006.00
Insurance
$ 1,475.00
Total Fixed Cost
$ 12,877.00
Stationery (Variable cost)
97x
Total Cost
12877 + 97x
Net Income
[699x - [12877 + 97x]
= 699x – 97x - 12877
= 602x - 12877
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.