Question

Orlando and Diego Universities offer executive training courses to corporate clients. Orlando pays its instructors $4,600 per course taught. Diego pays its instructors $230 per student enrolled in the class. Both universities charge executives a $400 tuition fee per course attended.

Required
a. Prepare income statements for Orlando and Diego, assuming that 20 students attend a course.
b. Orlando University embarks on a strategy to entice students from Diego University by lowering its tuition to $220 per course. Prepare an income statement for Orlando assuming that the university is successful and enrolls 40 students in its course.
c. Diego University embarks on a strategy to entice students from Orlando University by lowering its tuition to $220 per course. Prepare an income statement for Diego, assuming that the university is successful and enrolls 40 students in its course.
d. Explain why the strategy described in Requirement b produced a profit but the same strategy described in Requirement c produced a loss.
e. Prepare income statements for Orlando and Diego Universities, assuming that 10 students attend a course, and assuming that both universities charge executives a $400 tuition fee per course attended.
f. It is always better to have fixed rather than variable cost. Explain why this statement is false.
g. It is always better to have variable rather than fixed cost. Explain why this statement is false.



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  • CreatedFebruary 07, 2014
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