Homework Help is Here – Start Your Trial Now!
Business
Finance
Question 1: Know your numbers! You are a student at the University of North Anywhere. There are three components to your education costs each year. There are tuition fees, living in the university Hall of Residence (with free meals), and books (or other required course materials) bought directly from the publishers. Each student's spending on these items in the base year was as follows. Books = $100 Residence = $4,100 Tuition = $5,400 Only the students who were at the university in the base year know the actual dollars spent on each item. You are at the university 10 years later and so do NOT know those amounts. You know ONLY the current year's index of each cost, which are Books = 130 Residence = 120 Tuition = 170 Now the university proposes to raise tuition fees to cover cost increases. The Chair of the Student Council argues: "Look at what's happened to the cost of our education already!! The index of the total costs of books, residence, and tuition is now (130+120+170)/3 = 140. That's 40% increase in these costs over the last 10 years! It wouldn't be fair to make us pay even more next year". The University President argues: "We sympathize with you about the higher costs of books, but those revenues got to the publisher not to the university. Õur cost index for providing residences and tuition have gone up to (120 + 170)/2 = 145. That's a 45% increase over the same period. An increase in tuition fees to cover our rising expenses is quite reasonable since our costs have gone up by a greater percentage than yours." You are hired as a consultant to a University Advisory Committee to verify the Student and the University positions on cost inflation in the above statements. What do you do and what do you find?

Question 1: Know your numbers! You are a student at the University of North Anywhere. There are three components to your education costs each year. There are tuition fees, living in the university Hall of Residence (with free meals), and books (or other required course materials) bought directly from the publishers. Each student's spending on these items in the base year was as follows. Books = $100 Residence = $4,100 Tuition = $5,400 Only the students who were at the university in the base year know the actual dollars spent on each item. You are at the university 10 years later and so do NOT know those amounts. You know ONLY the current year's index of each cost, which are Books = 130 Residence = 120 Tuition = 170 Now the university proposes to raise tuition fees to cover cost increases. The Chair of the Student Council argues: "Look at what's happened to the cost of our education already!! The index of the total costs of books, residence, and tuition is now (130+120+170)/3 = 140. That's 40% increase in these costs over the last 10 years! It wouldn't be fair to make us pay even more next year". The University President argues: "We sympathize with you about the higher costs of books, but those revenues got to the publisher not to the university. Õur cost index for providing residences and tuition have gone up to (120 + 170)/2 = 145. That's a 45% increase over the same period. An increase in tuition fees to cover our rising expenses is quite reasonable since our costs have gone up by a greater percentage than yours." You are hired as a consultant to a University Advisory Committee to verify the Student and the University positions on cost inflation in the above statements. What do you do and what do you find?

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4TIF
See similar textbooks
icon
Related questions
Question
Question 1: Know your numbers! You are a student at the University of North Anywhere. There are three components to your education costs each year. There are tuition fees, living in the university Hall of Residence (with free meals), and books (or other required course materials) bought directly from the publishers. Each student's spending on these items in the base year was as follows. Books = $100 Residence = $4,100 Tuition = $5,400 Only the students who were at the university in the base year know the actual dollars spent on each item. You are at the university 10 years later and so do NOT know those amounts. You know ONLY the current year's index of each cost, which are Books = 130 Residence = 120 Tuition = 170 Now the university proposes to raise tuition fees to cover cost increases. The Chair of the Student Council argues: "Look at what's happened to the cost of our education already!! The index of the total costs of books, residence, and tuition is now (130+120+170)/3 = 140. That's 40% increase in these costs over the last 10 years! It wouldn't be fair to make us pay even more next year". The University President argues: “We sympathize with you about the higher costs of books, but those revenues got to the publisher not to the university. Our cost index for providing residences and tuition have gone up to (120 + 170)/2 = 145. That's a 45% increase over the same period. An increase in tuition fees to cover our rising expenses is quite reasonable since our costs have gone up by a greater percentage than yours. You are hired as a consultant to a University Advisory Committee to verify the Student and the University positions on cost inflation in the above statements. What do you do and what do you find?
Transcribed Image Text:Question 1: Know your numbers! You are a student at the University of North Anywhere. There are three components to your education costs each year. There are tuition fees, living in the university Hall of Residence (with free meals), and books (or other required course materials) bought directly from the publishers. Each student's spending on these items in the base year was as follows. Books = $100 Residence = $4,100 Tuition = $5,400 Only the students who were at the university in the base year know the actual dollars spent on each item. You are at the university 10 years later and so do NOT know those amounts. You know ONLY the current year's index of each cost, which are Books = 130 Residence = 120 Tuition = 170 Now the university proposes to raise tuition fees to cover cost increases. The Chair of the Student Council argues: "Look at what's happened to the cost of our education already!! The index of the total costs of books, residence, and tuition is now (130+120+170)/3 = 140. That's 40% increase in these costs over the last 10 years! It wouldn't be fair to make us pay even more next year". The University President argues: “We sympathize with you about the higher costs of books, but those revenues got to the publisher not to the university. Our cost index for providing residences and tuition have gone up to (120 + 170)/2 = 145. That's a 45% increase over the same period. An increase in tuition fees to cover our rising expenses is quite reasonable since our costs have gone up by a greater percentage than yours. You are hired as a consultant to a University Advisory Committee to verify the Student and the University positions on cost inflation in the above statements. What do you do and what do you find?
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Financial Planning
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
SEE MORE TEXTBOOKS