Question

Tutor, Inc. (TI) provides instructional services to its customers. TI charges $200 per student. The Company expects to serve 500 students during the coming year. All of the Company's expenses are fixed. Total annual fixed cost are projected to be $60,000. If the estimated number of students increase by 10%, net income will increase by_______.

a. 25%.
b. 30%.
c. 10%.
d. 20%.

Answer 1

If the estimated number of students increases by 10%, the net income of Tutor, Inc. will increase by 10%.

Step-by-step explanation:

To find the increase in net income, we need to consider the change in the number of students served. If the estimated number of students increases by 10%, the new number of students served will be 500 + 10% of 500 = 500 + 0.1 × 500 = 550 students.

The new net income can be calculated by multiplying the new number of students served by the charging price per student, which is $200. So, the new net income is 550 × $200 = $110,000.

The increase in net income is the difference between the new net income and the old net income. The old net income is the net income with 500 students, which is 500 × $200 = $100,000.

Therefore, the increase in net income is $110,000 - $100,000 = $10,000.

The increase in net income represents the percentage increase in net income if we divide it by the old net income and multiply by 100%. So, the percentage increase in net income is ($10,000 / $100,000) × 100% = 10%.

Therefore, the correct answer is c. 10%.

Answer 2

correct answer is a. 25%

Step-by-step explanation:

given data

TI charges = $200 per student

expects students = 500

Total annual fixed cost = $60,000

students increase = 10% = 0.10 × 500 = 50 + 500 = 550

solution

first we get here revenue from 500 students that is

revenue = 500 × 200 = $100000 .............1

and revenue by 550 students

revenue = 550 × 200 = $110000 ................2

so net income for 500 students will be

net income = 100000 - 60000 = $40000

and

net income for 550 students will be

net income = 110000 - 60000 = $50000

so here we get change is $50000 - $40000 = $10000

so net income will increase as =
`(10000)/(40000)` × 100

net income will increase as = 25%

correct answer is a. 25%