Question

You run a school in Florida. Fixed monthly cost is $5,371.00 for rent and utilities, $5,502.00 is spent in salaries and $1,071.00 in insurance. Also every student adds up to $99.00 per month in stationary, food etc. You charge $725.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $10,110.00, salaries to $6,928.00 and insurance to $2,339.00 per month. Variable cost per student will increase up to $177.00 per month. However you can charge $1,169.00 per student. At what point will you be indifferent between your current mode of operation and the new option

Answer 1

the total amount of students is approximately 20

Step-by-step explanation:

Answer 2

Answer: You will be indifferent when the total number of student is 20 (approx).

Step-by-step explanation:

Let the number of student be x

Total profit from first operation:

= Charge per student × x - rent - salaries - insurance - Students stationary

= 725x - 5,371 - 5,502 - 1,071 - 99x

= 626x - 11,944

Total profit from second operation:

= Charge per student × x - rent - salaries - insurance - Students stationary

= 1169x - 10,110 - 6,928 - 2,339 - 177x

= 992x - 19377

At point of indifference,

Profit from first operation = profit from second operation

626x - 11,944 = 992x - 19377

366x = 7,433

x = 20.30 or 20 (Approx)

Hence, you will be indifferent when the total number of student is 20 (approx).