Question

Northern University is trying to decide whether to allow 100 more students into the university. Tuition is $6,600 per year. The controller has determined the following schedule of costs to educate students:

Number of Students                      Total costs

                                4,000                             $ 30,000,000

                                4,100                               30,300,000

                                4,200                               30,600,000

                                4,300                               30,900,000

The current enrollment is 4,200 students. The president of the university has calculated the cost per student in the following manner: $30,600,000/4,200 students = $7,286 per student. The president was wondering why the university should accept more students if the tuition is only $6,600.

1. a. What are the variable costs per student and the total fixed costs of operating the university?
2. b. What is the number of students at which the university breaks even?
3. c. Should the university accept more students with tuition at $6,600?

Answer 1