Question: Quality Cabinet Construction is considering introducing a new cabinet-production seminar with the following price and cost characteristics: Tuition....................................................................................................... $200 per Student Variable Costs (wood, supplies,

Quality Cabinet Construction is considering introducing a new cabinet-production seminar with the following price and cost characteristics:

Tuition....................................................................................................... $200 per Student

Variable Costs (wood, supplies, etc.)........................................................ $120 per Student

Fixed Costs (advertising, instructor’s salary, insurance, etc.) ............... $400,000 per Year

a. What enrollment enables Quality Cabinet Construction to break even?

b. How many students will enable Quality Cabinet Construction to make an operating profit of $200,000 for the year?

c. Assume that the projected enrollment for the year is 8,000 students for each of the following situations:

(1) What will be the operating profit for 8,000 students?

(2) What would be the operating profit if the tuition per student (that is, sales price) decreased by 10 percent? Increased by 20 percent?

(3) What would be the operating profit if variable costs per student decreased by 10 percent? Increased by 20 percent?

(4) Suppose that fixed costs for the year are 10 percent lower than projected, whereas variable costs per student are 10 percent higher than projected. What would be the operating profit for the year?

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