You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food etc. You charge $668.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you be indifferent between your current mode of operation and the new option?
You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food etc. You charge $668.00 per month from every student now. You are considering moving the school to another neighborhood where the rent and utilities will increase to $10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you be indifferent between your current mode of operation and the new option?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 16E
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![You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in
salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food
etc. You charge $668.00 per month from every student now.
You are considering moving the school to another neighborhood where the rent and utilities will increase to
$10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will
increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you
be indifferent between your current mode of operation and the new option?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3ecd563d-b762-406b-ac94-5c18c7b6a845%2Fbacec233-f315-4db0-98ba-eb047394759c%2Ftz3jmrs.png&w=3840&q=75)
Transcribed Image Text:You run a school in Florida. Fixed monthly cost is $5,373.00 for rent and utilities, $6,124.00 is spent in
salaries and $1,233.00 in insurance. Also every student adds up to $102.00 per month in stationary, food
etc. You charge $668.00 per month from every student now.
You are considering moving the school to another neighborhood where the rent and utilities will increase to
$10,770.00, salaries to $6,328.00 and insurance to $2,315.00 per month. Variable cost per student will
increase up to $158.00 per month. However you can charge $1,109.00 per student. At what point will you
be indifferent between your current mode of operation and the new option?
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