Pacific and Atlantic Universities offer executive training courses to corporate clients. Pacific pays its instructors $5,310 per course taught. Atlantic pays its instructors $295 per student enrolled in the class. Both universities charge executives a $340 tuition fee per course attended.

Required

a. Prepare income statements for Pacific and Atlantic, assuming that 18 students attend a course.

b. Pacific University embarks on a strategy to entice students from Atlantic University by lowering its tuition to $220 per course. Prepare an income statement for Pacific, assuming that the university is successful and enrolls 36 students in its course.

c. Atlantic University embarks on a strategy to entice students from Pacific University by lowering its tuition to $220 per course. Prepare an income statement for Atlantic, assuming that the university is successful and enrolls 36 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 Pacific and Atlantic Universities, assuming that 15 students attend a course, assuming that both universities charge executives a $340 tuition fee per course attended.

f. It is always better to have fixed than variable cost. Explain why this statement is false.

g. It is always better to have variable than fixed cost. Explain why this statement is false.