Question

Finch Training Services (FTS) 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 FTS incurs is instructor salaries; it pays instructors $5,200 per course taught. FTS recently agreed to offer a course of instruction to the employees of Novak Incorporated at a price of $470 per student. Novak estimated that 20 students would attend the course.

Base your answers on the preceding information.

Required

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

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

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

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

Answer 1