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Problem $11-25$A $($Algo$)$ Effects of operating leverage on profitability LO $11-2$

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Solomon Training Services $($STS$)$ provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients$$ offices on the clients$$ equipment. The only major expense STS incurs is instructor salaries; it pays instructors $$5,600$ per course taught. STS recently agreed to offer a course of instruction to the employees of Novak Incorporated at a price of $$450$ per student. Novak estimated that $20$ students would attend the course.

Base your answers on the preceding information.

Problem $11-25$A $($Algo$)$ Part $1$

Required

Relative to the number of students in a single course, is the cost of instruction a fixed or a variable cost?

Determine the profit, assuming that $20$ students attend the course.

Determine the profit, assuming a $10$ percent increase in enrollment $($i$.$e$.,$ enrollment increases to $22$ students$).$ What is the percentage change in profitability?

Determine the profit, assuming a $10$ percent decrease in enrollment $($i$.$e$.,$ enrollment decreases to $18$ students$).$ What is the percentage change in profitability?