You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food etc. You charge $668.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you be indifferent between your current mode of operation and the new option?

You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food etc. You charge $668.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you be indifferent between your current mode of operation and the new option?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 16E

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