A Recent Study on Enrollment at a Liberal Arts College

question 158

Multiple Choice

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91.The administration is considering a tuition increase to help balance the budget.The revenue-maximizing decision is to

• A)decrease tuition, which should boost enrollment enough to balance the budget.
• B)decrease tuition, which would bring in more revenue.
• C)leave tuition as is-an increase would not help balance the budget.
• D)increase tuition, which would bring in more revenue.

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Definitions:

Variable Costing Income Statement

A financial statement that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and separates fixed overhead costs as period costs.

Electricity

The cost associated with the consumption of electrical power used in business operations or manufacturing processes.

Absorption Costing

An accounting method where all manufacturing costs, both fixed and variable, are allocated to produced units, making it different from variable or direct costing methods.

Factory Machinery

The collective term for the mechanical, electrical, and computer-based equipment used in a manufacturing or production facility to create products.