Required information [The following information applies to the questions display
ID: 2570137 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
Franklin Training Services (FTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients’ offices on the clients’ equipment. The only major expense FTS incurs is instructor salaries; it pays instructors $6,000 per course taught. FTS recently agreed to offer a course of instruction to the employees of Novak Incorporated at a price of $700 per student. Novak estimated that 20 students would attend the course.
Base your answers on the preceding information.
The instructor has offered to teach the course for a percentage of tuition fees. Specifically, she wants $300 per person attending the class. Assume that the tuition fee remains at $700 per student.
Is the cost of instruction a fixed or a variable cost?
Determine the profit, assuming that 20 students take the course.
Determine the profit, assuming a 10 percent increase in enrollment (i.e., enrollment increases to 22 students). What is the percentage change in profitability?
Determine the profit, assuming a 10 percent decrease in enrollment (i.e., enrollment decreases to 18 students). What is the percentage change in profitability?
Explanation / Answer
1)
The cost to the instructor is a vatiable cost. Because the instructors fee changes regarding total capacity or activity.(Variable cost changes in total in proportion to changes in related level of total activity or volume).
2)
Revenue = No. of students × price per students
=20×700=14000
cost = No. of students × instructors fee per students
=20×300=6000
PROFIT= REVENUE - COST
=14000-6000=8000
3)
10% Increase in enrollment
No.of students =22
REVENUE = 22× 700=15400
COST=22×300=6600
PROFIT = 15400-6600=8800
4)
Previouse profitability = profit ÷ revenue
=8000÷14000=57.14285
Current profitability = profit ÷ revenue
=8800÷15400=57.14285
*) Change in profitability = Change in profit ÷ previouse year profit
Previouse year profit = 8000
Current year profit = 8800
= change in profit= 8800-8000=800
=800÷8000=.10 or 10%
5)
10% decrease in enrollment
No of students = 18
REVENUE = 18×700 =12600
COST = 18×300 = 5400
PROFIT = REVENUE - COST
=12600-5400 = 7200
*) Change in profitability
= change in profit÷ 1 st year profit
Change in profit =8000-7200=800
1 st year profit = 8000
Change in profitability = 800÷8000 = .10 or 10 %
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.