The Exorbitant Course Fees -Which of These Formulations of the Budget Constraint Is Correct

question 71

Multiple Choice

The Exorbitant Course Fees. The $75 per credit hour course fee tacked on to all the MBA classes has generated a windfall of $56,250 in its first semester. "Now we just need to make sure we spend it all," the Assistant Dean cackled. She charged the Graduate Curriculum Committee with generating a shopping list before their next meeting. Four months later, the chairman of the committee distributed the following. As the professor for the quantitative modeling course, he tended to think in terms of decision variables, so he added the left-most column for ease of use.
$$\begin{array} { | c | l | l | l | } \hline \begin{array} { l } \text { Decision } \\\text { Variable }\end{array} & \text { Item } & \text { Cost } & \text { Note } \\\hline \text { A } & \text { iPads for everybody } & \$ 750 / \text { unit } & \text { Must get a cover if these are purchased } \\\hline \text { B } & \text { iPad covers with MBA logo } & \$ 25 / \text { unit } & \text { Not needed unless we buy iPads } \\\hline \text { C } & \text { Speaker series } & \$ 15,000 & \text { Can't afford both this and the iPads } \\\hline \text { D } & \begin{array} { l } \text { Subscriptions to the Wall } \\\text { Street Joumal }\end{array} & \$ 10 / \text { unit } & \text { Don't need if we have the electronic version } \\\hline & \begin{array} { l } \text { Subscriptions to the } \\\text { electronic version of the Wall }\end{array} & & \\\text { E } & \begin{array} { l } \text { Street Joumal }\end{array} &\$5/unit& \text { Worthless without the iPads } \\\hline\end{array}$$
-Which of these formulations of the budget constraint is correct? Assume that there are 20 students in this semesters MBA class.

• A) $750A + $25B + $15,000C + $10D + $5E ? $56,250
• B) 20A + 20B + C + 20D + 20E ? $56,250
• C) A + B + C + D + E ? 20
• D) $15,000A + $500B + $15,000C + $200D + $100E ? $56,250

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Definitions:

Capacity

The maximum level of output that a company can sustain to make a product or provide a service.

Job-Order Costing

A cost accounting system that calculates the cost of individual jobs or orders, commonly used in custom manufacturing.

Automated Shaper

A machine that uses computer controls to cut and shape materials with precision, often used in manufacturing for consistent and efficient production.

Manufacturing Overhead

Costs associated with manufacturing a product that are not directly tied to the factory's operations.