Reference no: EM132818181

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   $470per student
Variable costs (tiles, supplies, and so on) 260 per student
Fixed costs (advertising, salaries, and so on) 105,000 per year

Required:

Assume that the projected enrollment for the year is 810 students for each of the following (considered independently):

Problem 1. What will be the operating profit (for 810 students)?

Problem 2. What would be the operating profit if the tuition per student (that is, sales price) decreased by 7 percent? Increased by 25 percent?

Problem 3. What would be the operating profit if variable costs per student decreased by 13 percent? Increased by 19 percent?

Problem 4. Suppose that fixed costs for the year are 6 percent lower than projected, whereas variable costs per student are 5 percent higher than projected. What would be the operating profit for the year?