Question

a. Collings College has annual fixed operating costs of $12,000,000 and variable operating costs of $1,000 per student. Tuition is $8,000 per student for the coming academic year, with a projected enrollment of 1,500 students. Expected revenues from endowments and federal and state grants total $200,000. Determine the amount the college must obtain from other sources.

(d.) A civic organization is engaged in a fund-raising program. On Civic Sunday, it will sell newspapers at $1.40 each. The organization will pay $0.75 for each newspaper. Costs of the necessary permits, signs, and so forth are $500. Determine the amount the organization will raise if it sells 5,400 newspapers.

Answer 1

a.

Particular	Amount
No. of students	1,500
Variables operating cost 1000 per student 1500*1000	1,500,000
Fixed cost	12,000,000
Total expense (12,000,000 + 1,500,000)	13,500,000
Revenue from Tution 1500 * 8000	1,200,000
Grant from federal and state	200,000
College must obtain from other sources (13,500,000 - 1,200,000 - 200,000)	12,100,000

d. Selling price of each newspaper = $1.40

Cost of each newspaper = $0.75

Contribution Margin = Selling price - Cost price

= 1.40 - 0.75

= 0.65

For selling 5,400 newspaper = Fund raised in number * Contribution margin - Fixed cost

= 5,400 * 0.65 - 500

= $3,010