What are the total fixed costs of operating the university

Assignment Help Financial Management

Reference no: EM131607773

Lihue University Lihue University was formed in 1898 in Columbus, Ohio. While the university has prospered over the years, it has been losing money for the last several years. The president of the university has established a Strategic Leadership Team, (SLT) to evaluate the current financial situation and offer alterative strategies for improvement. One of the key issues identified by the SLT was increasing levels of student enrollment. Presently, Lihue University is trying to decide whether to allow 100 additional students into the university. Tuition is set at $5,500 per year. The controller has determined a schedule of costs to educate students at various enrollment levels. At 5000 students the university’s total costs equal $30,000,000; at 5100 students the university’s total costs equal $30,300,000; at 5200 students the university’s total costs equal $30,600,000; and at 5300 students the university’s total costs equal $30,900,000. The current level of enrollment at the university is 5200 students. The president of the university has calculated the cost per student in the following manner: $30,600,000 / 5200 students = $5,885 per student. The president was wondering why the university should accept more students if the tuition is only $5,500. “It seems to me that we would be losing $385 per additional student”, the president was overheard saying to an SLT member.

Required:

1. What are the total fixed costs of operating the university?

2. What are the variable cost and contribution margin per student at the university?

3. What is the breakeven point in terms of units and tuition revenue dollars for Lihue University?

4. Should the additional 100 students be admitted to the university and what is your rationale?

Reference no: EM131607773

Questions Cloud

The stock market crash could have been prevented : Andrew Bernstein implies that the stock market crash could have been prevented, if:

Profit margin and payout ratio remain constant : what is the amount of external financing needed, assuming XYZ is operating at full capacity, and profit margin and payout ratio remain constant?

The elasticity of demand for dell computers in europe : Dell is selling 30,000 units in Europe at an average price of €1,500 per unit. The elasticity of demand for Dell computers in Europe is e = 1.5.

Calculate standard deviation-coefficient of variance of npv : Calculate the standard deviation of NPV and the coefficient of variance of the NPV.

What are the total fixed costs of operating the university : What are the total fixed costs of operating the university? What are the variable cost and contribution margin per student at the university?

Effective hedging assuming zero passthrough : Which of the following would be an effective hedging assuming zero passthrough?

Calculate expected return-variance and standard deviation : Calculate the expected return, variance and standard deviation for each share.

Delta for dell dollar profit assuming zero pass through : What is the delta for Dell’s dollar profit assuming zero pass through?

Company must manufacture and sell to yield before-tax profit : what is the number of units that the company must manufacture and sell to yield a before-tax profit of 20%?

User Account

All Pages