Question

An educational institution has total direct labor and material costs of $1964 per student. Its fixed costs are $352,800. Total revenues for the year were $1,800,000. It had 800 students in the past year. How many students should they accept in the next year to break even assuming the variable cost margins are equal to this year, and assuming fixed costs are to increase by $19,000 due to increased rent for expansion? (round to the nearest whole number).

Answer 1

1300 students

Step-by-step explanation:

The computation of the no of students to be accepted for break even is given below:

Fixed cost is

= $352,800 + $19,000

= $371,800

Revenue per student is

= $1,800,000 ÷ 800

= 2250

And,

Variable cost per student = 1964

So,

Contribution margin = Revenue - Variable cost

= $2,250 - $1,964

= $286

Break even point is

= Fixed cost ÷ Contribution margin per unit

= 371800÷ 286

= 1300 students