Professor John Morton has just been appointed chairperson of the Finance Department at Westland University. In reviewing the department's cost records, Professor Morton has found the following total cost associated with Finance 101 over the last five terms: Term Fall, last year Winter, last year Summer, last year Fall, this year Winter, this year Number of Sections Offered Total Cost 4 6 2 5 3 $ 10,000 $ 14,000 $ 7,000 $ 13,000 $ 9,500 Professor Morton knows that there are some variable costs, such as amounts paid to graduate assistants, associated with the course. He would like to have the variable and fixed costs separated for planning purposes. 3-a. Assume that because of the small number of sections offered during the Winter Term this year, Professor Morton will have to offer eight sections of Finance 101 during the Fall Term. Compute the expected total cost for Finance 101. 3-b. Can you see any problem with using the cost formula from (2) above to derive this total cost figure?
Professor John Morton has just been appointed chairperson of the Finance Department at Westland University. In reviewing the department's cost records, Professor Morton has found the following total cost associated with Finance 101 over the last five terms: Term Fall, last year Winter, last year Summer, last year Fall, this year Winter, this year Number of Sections Offered Total Cost 4 6 2 5 3 $ 10,000 $ 14,000 $ 7,000 $ 13,000 $ 9,500 Professor Morton knows that there are some variable costs, such as amounts paid to graduate assistants, associated with the course. He would like to have the variable and fixed costs separated for planning purposes. 3-a. Assume that because of the small number of sections offered during the Winter Term this year, Professor Morton will have to offer eight sections of Finance 101 during the Fall Term. Compute the expected total cost for Finance 101. 3-b. Can you see any problem with using the cost formula from (2) above to derive this total cost figure?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Professor John Morton has just been appointed chairperson of the Finance Department at Westland
University. In reviewing the department's cost records, Professor Morton has found the following total cost
associated with Finance 101 over the last five terms:
Term
Fall, last year
Winter, last year
Summer, last year
Fall, this year
Winter, this year
Number of
Sections Offered
Total Cost
4
6
2
5
3
$ 10,000
$ 14,000
$ 7,000
$
13,000
$ 9,500
Professor Morton knows that there are some variable costs, such as amounts paid to graduate assistants,
associated with the course. He would like to have the variable and fixed costs separated for planning
purposes.
3-a. Assume that because of the small number of sections offered during the Winter Term this year, Professor
Morton will have to offer eight sections of Finance 101 during the Fall Term. Compute the expected total cost
for Finance 101.
3-b. Can you see any problem with using the cost formula from (2) above to derive this total cost figure?
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