Reference no: EM132905938

Question - Following increased competition and customer expectations, ABC company has been forced to revisit its operational strategy and its quality standards. The following budgeted data for 2022 are available:

Number of Trainees 4,500, Operating Income $54,000

Budgeted Variable Cost per Trainee:

Trainee's Support Service $36

Training Materials $12

Foods $20

Miscellaneous Products & Services $20

Budgeted Fixed Cost per Training:

Facilities 14,500

Salaries 15,500

Based on the customer survey it conducted, ABC company has learned that several improvements to its products and services are required. The improvements would provide the following impacts:

Increase in the Number of Trainees 60%

Increase in the Total Variable Costs 55%

Increase in the Total Fixed Costs 85%

You are required to:

(i) Calculate the budgeted revenue per trainee based on the available data.

(ii) Assuming that budgeted revenue per trainee remains unchanged, explain (with numerical justifications) whether ABC company should implement the suggested improvements.

(iii) Assuming that budgeted revenue per trainee remains unchanged, calculate the variable cost per trainee which makes the suggested improvements irrelevant to ABC company.