problem 2-3 Engineering Study Advancement Committee planned a summer training pr

Question

problem 2-3 Engineering Study Advancement Committee planned a summer training program with following data for School administrative approval: 1. What is the program cost break-even point (how many students)? 2. If 40 students registered for this training, school will open another classroom. what is the marginal cost? 3. How many students required for this program profitable? food and cost formaterial perstudent revenue per student siz4classroostudent 225 225 classroomA classroom B student registration 0 to 40 35

Explanation / Answer

OR Fixed Cost / Contribution Margin Per Unit

In this above case,

Fixed Cost = Cost for Classroom i.e. 225

Sales Price per Unit (Revenue per student) = 35

Variable Cost per unit (Food and material per student) = 20

                Break-Even Point = 225/ (35-20) = 225/15=15

Marginal cost = Change in total cost of program/ change in registered student by unit 1

Change in total cost of program when 41st student registers for the training = Cost of Additional classroom (225) + cost of Food and Material for additional student (20)

Marginal Cost = 225+20/1 = 240

Contribution margin per student = Revenue per student – Variable cost per student (food and material cost)

= 35-20 = 15

No. of students required for making the program profitable = Additional fixed cost /Contribution margin = 225/15 = 15

Total students required to make the program profitable when 2 classrooms are used = 15+15 = 30

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