Reference no: EM131967441

Problem

University AAA is organized into four colleges with the following characteristics:
                                                               Business     Engineering      Science      Humanities
Number of majors                                     10,000         9,000          9,600        2,400
Number of non-majors taking classes         2,000          1000          4,800        7,200
Revenue from student fees                   $1,200,000    $1,000,000   $1,440,000 $960,000
Revenue from external grants               $400,000    $3,000,000    $1,600,000   $240,000
Variable cost per student                          $35.00       $65.00        $80.00       $25.00
Fixed cost per student (based on total students) $35.00 $65.00   $25.00     $10.00

A. List three items that would likely be included in the category of variable costs per student from the perspective of each college.

B. List two items that would likely be included as fixed costs per student from the perspective of each college.

C. Calculate the contribution margin per student from the perspective of each college and then from the perspective of the university as a whole.

D. Calculate the total profit from the perspective of each college and then for the university as a whole.

E. Based on financial considerations alone, identify the college that would be most likely to be dropped from the university during a budget crisis.