Solved Question: Bri Smith and Joe Sullivan, two kinesiology students at ASU

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Question:

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.

Answer:

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 using 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, unit price of $119 would have to be charged.

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