What is wrong with the president''s calculation

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Reference no: EM1313082

Calculation of the fixed and variable costs of operating the university.

Midstate University is trying to decide whether to allow 100 more students into the university. Tuition is $5000 per year. The controller has determined the following schedule of costs to educate students:

Number of Students	Total Costs
4000	$30,000,000
4100	30,300,000
4200	30,600,000
4300	30,900,000

The current enrollment is 4200 students. The president of the university has calculated the cost per student in the following manner: $30,600,000/4200 students = $7286 per student. The president was wondering why the university should accept more students if the tuition is only $5000.

a) What is wrong with the president's calculation?

b) What are the fixed and variable costs of operating the university?

Reference no: EM1313082

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