Fixed, Variable, and Average Costs
Midstate University Is Trying to Decide

question 19

Essay

Fixed, Variable, and Average Costs
Midstate University is trying to decide whether to allow 100 more students into the university. Tuition is $5,000 per year. The controller has determined the following schedule of costs to educate students: $$\begin{array} { | c | r | } \hline \text { Number of Students } & \text { Total Costs } \\\hline 4,000 & \$ 30,000,000 \\\hline 4,100 & 30,300,000 \\\hline 4,200 & 30,600,000 \\\hline 4,300 & 30,900,000 \\\hline\end{array}$$ The current enrollment is 4,200 students. The president of the university has calculated the cost per student in the following manner: $30,600,000/4,200 students = $7286 per student. The president was wondering why the university should accept more students if the tuition is only $5,000.
Required:
a. What is wrong with the president's calculation?
b. What are the fixed and variable costs of operating the university?

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Definitions:

Cerebral Cortex

The outer layer of neural tissue of the cerebrum of the brain, playing a key role in memory, attention, perception, awareness, thought, language, and consciousness.

Abdominal Aorta

The continuation of the thoracic aorta that runs through the abdomen, supplying blood to the abdominal and pelvic organs and the legs.

Common Iliac Artery

A major artery in the pelvic region that splits into the internal and external iliac arteries, supplying blood to the pelvis and legs.

Bifurcation

The division of something into two branches or parts, such as the bifurcation of a blood vessel or a route.