Question

2. Bri Smith and Joe Sullivan, two kinesiology students at ASU, are considering the possibility of offering swimming lessons to children at the university pool. The pool would charge a fixed rental fee of $1500 for the 8-weeks of lessons as well as an admission and lifeguarding fee of $7 per pupil. Bri and Joe estimate an additional cost of $4 per pupil to hire additional helpers. Bri and Joe plan to charge $65 per student for the 8-week class.

a. Use the data given to create a model for the total profit. Use the Excel tool Data/What-If Analysis/Goal Seek to determine the following:

b. the break-even quantity for the number of pupils needed to enroll in the swimming class.

c. the number of pupils they need to enroll if they want to make a profit of $5,000.

d. how much per pupil they would have to charge if only 60 pupils enrolled and they still wanted to realize their profit goal of $5,000.

e. Create a cost/revenue graph that shows total cost and total revenues (two lines) versus the number of pupils. (Make sure you reset the charge per pupil to $65 to determine graph inputs and use the range of the number of pupils from 0 to 150)

Answer 1

a)

Unit Price	$65
Units sold
Total revenue	$0
Fixed costs	$1,500
variable costs	$11
Total cost	$1,500
Profit	-$1,500

b) the break even quantity for the number of pupils to be enrolled by uisng goal seek in excel:

Unit Price	$65
Units sold	28
Total revenue	$1,806
Fixed costs	$1,500
variable costs	$11
Total cost	$1,806
Profit	$0

c) number of pupils to be enrolled to make a target profit of $5000

Unit Price	$65
Units sold	120
Total revenue	$7,824
Fixed costs	$1,500
variable costs	$11
Total cost	$2,824
Profit	$5,000

d) Charge per pupil if only 60 pupils were enrolled and a target profit of $5000 is required

Unit Price	$119
Units sold	60
Total revenue	$7,160
Fixed costs	$1,500
variable costs	$11
Total cost	$2,160
Profit	$5,000

Hence, aunit price of $119 would have to be charged.