Question

The College of Business at Tech is planning to begin an online MBA program. The initial start-up cost for computing equipment, facilities, course development, and staff recruitment and development is $350,000.The college plans to charge tuition of $18,000 per student per year. However, the university administration will charge the college $12,000 per student for the first 100 students enrolled each year for administrative costs and its share of the tuition payments.

a. How many students does the college need to enroll in the first year to break even?
b. If the college can enroll 75 students the first year, how much profit will it make?
c. The college believes it can increase tuition to $24,000, but doing so would reduce enrollment to 35. Should the college consider doing this?

Answer 1

a).To break even

They need to enroll 87 student

B) Profit=$100000

C) yeah they can think of that.

Profit= $70000

Explanation:

Initial start up cost = $350000

Cost from adminstrative bodies

= 12000 for first 100 student

= $1200000

Total cost =$1200000+$350

Totral cost =$ 1550000

Tuition cost

= $18000 per student

To break even

The college needs to enroll

1550000/18000= 86.1

They need to enroll 87 student

B) if they enroll 75 students

Adminstrative cost = 12000*75

Adminstrative cost= 900000

Total cost= 350000+900000

Total cost =$ 1250000

Tuition fee= $18000*75

Tuition fee=$ 1350000

Their profit= 1350000-1250000

Profit=$100000

C).if tuition is $24000 and enrollment number= 35

Adminstrative cost = 35*12000

Adminstrative cost = $420000

Total cost= $770000

Tuition fee= $24000*35

Tuition fee= $840000

Profit= $840000-$770000

Profit= $70000