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What would be the operating profit

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Question - Alameda Tile sells products to many people remodeling their homes and thinks that it could profitably offer courses on tile installation, which might also increase the demand for its products. The basic installation course has the following (tentative) price and cost characteristics.

Tuition $530 per student

Variable costs (tiles, supplies, and so on) $300 per student

Fixed costs (advertising, salaries, and so on) $119,600 per year

Required -

a. What enrollment will enable Alameda Tile to break even?

b. How many students will enable Alameda Tile to make an operating profit of $39,100 for the year?

c. Assume that the projected enrollment for the year is 840 students for each of the following (considered independently):

1. What will be the operating profit (for 840 students)?

2. What would be the operating profit if the tuition per student (that is, sales price) decreased by 7 percent? Increased by 22 percent?

3. What would be the operating profit if variable costs per student decreased by 14 percent? Increased by 17 percent?

4. Suppose that fixed costs for the year are 6 percent lower than projected, whereas variable costs per student are 9 percent higher than projected. What would be the operating profit for the year?

Reference no: EM132967628

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