Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON

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Textbook Question
Chapter 2, Problem 2.31E

Total costs and unit costs, service setting. National Training recently started a business providing training events for corporations. In order to better understand the profitability of the business, the owners asked you for an analysis of costs—what costs are fixed, what costs are variable, and so on, for each training session. You have the following cost information:

Trainer: \$11,000 per session

Materials: \$2,500 per session and \$35 per attendee

Catering Costs (subcontracted):

Food: \$75 per attendee

Setup/cleanup: \$25 per attendee

Fixed fee: \$5,000 per training session

National Training is pleased with the service they use for the catering and have allowed them to place brochures on each dinner table as a form of advertising. In exchange, the caterer gives National Training a \$1,000 discount per session.

1. 1. Draw a graph depicting fixed costs, variable costs, and total costs for each training session versus the number of guests.

Required

1. 2. Suppose 100 persons attend the next event. What is National Training’s total net cost and the cost per attendee?
2. 3. Suppose instead that 175 persons attend? What is National Training’s total net cost and the cost per attendee?
3. 4. How should National Training charge customers for their services? Explain briefly.
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