Calculation of the fixed and variable costs of operating

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Calculation of the fixed and variable costs of operating the university.

Midstate University is trying to decide whether to allow 100 more students into the university.  Tuition is $5000 per year.  The controller has determined the following schedule of costs to educate students:

Number of Students

Total Costs

4000

$30,000,000

4100

30,300,000

4200

30,600,000

4300

30,900,000

 The current enrollment is 4200 students.  The president of the university has calculated the cost per student in the following manner:  $30,600,000/4200 students = $7286 per student.  The president was wondering why the university should accept more students if the tuition is only $5000.

a)    What is wrong with the president's calculation?

b)   What are the fixed and variable costs of operating the university?

 

 

Reference no: EM13356292

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