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Cooper Training Service: Cost of Instruction and Profits

Cooper Training Service (CTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers a course on the clients' equipment. The only major expense CTS incurs is instructor salaries; it pays instructors $3,600 per course taught. CTS recently agreed to offer a course of instructors to the employees of Akers Incorporated at a price of $340 per student. Akers estimated that 20 students would attend the course.

Part 1:
a) Relative to the number of students in a single course, is the cost of instruction a fixed or a variable cost?

b) Determine the profit, assuming that 20 students attend the course.

c) Determine the profit, assuming a 20 percent increase in enrollment, enrollment increases to 24 students). What is the percentage change in profitability?

d) Determine the profit, assuming a 20 percent decrease in enrollment, (enrollment decreases to 16 students). What is the percentage change in profitability?

e) Explain why a 20 percent shift in enrollment produces more than 20 percent shift in profitability. Use the term that identifies this phenomenon.

Solution Preview

Please see the response which is attached as an Excel file.

Notice that profit change is done as a percent change (like ...

Solution Summary

Computations are provided in an attached Excel file (click on cells to see computations) so that you have a template for other future work of a similar nature. This is assignment is a classic case of what happens to profits when fixed or variable costs change. The term that captures the change in profits is given as a change in sales and the formula for it is provided.

$2.19