Reference no: EM133185107

Question - The university wants to explore whether to offer a new one-year medical short-course to complement its existing suite of medical and pharmacy courses.

The course would start in August 2022 and run for 12 months. Employers, such as the Local Authorities, would sponsor students to undertake the course so they would pay the fees. Market research and conversations with possible employers has shown that a fee above £3,500 would be unlikely to attract many students. A fee of £3,000 would be ideal but employers may be willing to pay £3,500.

Estimated fixed costs are £100,000. These include lecture staff, the hire of the building, standard advertising costs, electricity, IT equipment and the use of an ambulance. A list of the variable costs is below:

Variable costs £ (per student)

Mannequin 100

Resuscitator 200

Uniform 50

Membership 150

E-book licences 150

Work experience with NHS 300

Required -

i. Assuming the fee is £3,000, what is the number of students required for the course to break-even (That is, the point at which there is neither a profit nor loss)?

ii. Assuming the fee is £3,500, what is the number of students required for the course to break-even?

iii. How many students must enrol to earn £50,000 target profit? (Assume a fee of £3,000)

iv. What profit would result if 70 students enrolled at a fee of £3,000 per student.

v. If the university wants to earn a £50,000 profit, and student enrolments are 60, which price should it charge for the course?

vi. Based on your answer to question (i), how many additional students must enrol to cover the extra cost of £20,000 associated with training staff and additional costs associated with advertising and marketing a new course (assume a fee of £3,000)

vii. Profit maximisation can be achieved by reducing costs and/or increasing revenue. In a conversation with a colleague, she states 'the key factors that increase the probability of profit maximisation are management skill; a motivated and trained workforce; investment in technology and advertising'. Pick at least one of these factors and discuss how they can contribute to cost minimisation and revenue maximisation.