Question

Professional Exam Prep(PEP) uses a cost-plus model to determine the price it charges students. Specifically, the Company charges cost plus 25% of cost. Fixed costs, including facility rental and instructor compensation, amount to $6,000 per month. PEP incurs variable costs for books and supplies that amount to $50 per student. Monthly, enrollment tends to fluctuate. The following data represent the Company's expectations for the first three months of the current year.Day January February March TotalNo. of Students 20 30 50 100Total Variable Cost $1,000 $1,500 $2,500 $5,000Total Fixed Cost $6,000 $6,000 $6,000 Based on this information which of the following amounts represents the average price PEP should charge per student for the month of January.$287.50$230.00$350.00$437.50

Answer 1

$437.50

Step-by-step explanation:

Data provided in the question:

Day January February March Total

No. of Students 20 30 50 100

Total Variable Cost $1,000 $1,500 $2,500 $5,000

Total Fixed Cost $6,000 $6,000 $6,000 $18,000

Average cost per student for January

= [Total fixed cost + Total variable cost] ÷ Total number of students

= [$6,000 + $1,000] ÷ 20

= $350

Average price that should be charged

= Average cost per student for January + 25% of cost

= $350 + [0.25 × $350]

= $350 + $87.5

= $437.5

Hence,

Answer is option $437.50