Reference no: EM132548280

Prof Robert, of the University of Fresno, is an internationally known as Finance Guru. In 2015, Prof Robert and Manchester Business School (MBS) agreed to conduct a one-day seminar at MBS for marketing executives. Professional Fee per participant attending the Seminar was decided as £275 .

The Dean of Manchester Business School indicated to Prof Robert that the non-speaker related fixed costs for MBS conducting the seminar would be:

Promotion through Media                    £3500

Mailing of brochures                         £3500

Administrative Expenses at MBS         £2500

Charge for MBS lecture auditorium      £1500

The variable costs to MBS for each participant attending the seminar would be:

Meals and drinks                 £40

Reading Material and Folder  £40

The Dean of MBS initially offered to Prof Robert its regular compensation package of:

(a) business-class airfare and accommodation ( £3,000 maximum); and

(b) a £2,000 lecture fee.

Prof Robert viewed that £2,000 lecture fee was not providing him any upside potential (that is, no sharing when the seminar generates higher revenues that meeting the costs if the seminar is highly attended). He suggested instead , that he would receive 50% of the operating income (profit ) accruing to Manchester Business School (if positive) from the one-day seminar and no other payments. The Dean of Fresno quickly agreed to Prof. Robert's proposal after confirming that Prof Robert was willing to pay his own airfare and accommodation and deliver the seminar irrespective of the number of executives signed up to attend.

Prof Robert gave the one-day seminar at MBS in 2015 and then MBS repeated the Seminar in the next two years - 2016 100 executives attended , and in 2017 180 executives attended .

Problem (1) What were MBS's breakeven points (in number of executives attending the programme) in the first year if:

A. (a) Prof.Robert accepts the regular compensation package of £3,000 expenses and a £2,000 lecture fee;(b)Prof. Robert did not accept normal fees and airfare but receives 50% of the operating income to MBS (if positive) from the one-day seminar and no other payments.

B. How much was Prof. Robert paid by MBS for the one-day seminar under the 50% of MBS's operating income compensation plan in (a) 2015, (b) 2016, and (c) 2017s? (Assume that the £275 charge per executive attending and MBS's fixed and variable costs are the same each year.)