Description
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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