Question

In: Accounting

Kenton and Denton Universities offer executive training courses to corporate clients. Kenton pays its instructors $5,382...

Kenton and Denton Universities offer executive training courses to corporate clients. Kenton pays its instructors $5,382 per course taught. Denton pays its instructors $299 per student enrolled in the class. Both universities charge executives a $348 tuition fee per course attended.

Required

a.Prepare income statements for Kenton and Denton, assuming that 18 students attend a course.

b.Kenton University embarks on a strategy to entice students from Denton University by lowering its tuition to $228 per course. Prepare an income statement for Kenton assuming that the university is successful and enrolls 36 students in its course.

c.Denton University embarks on a strategy to entice students from Kenton University by lowering its tuition to $228 per course. Prepare an income statement for Denton, assuming that the university is successful and enrolls 36 students in its course.

e.Prepare income statements for Kenton and Denton Universities, assuming that 9 students attend a course, and assuming that both universities charge executives a $348 tuition fee per course attended.

Solutions

Expert Solution

A) 18 students attended the course, and per course charges for the executives i.e Revenue for the university = $ 348 per course attended.

Revenue for both the university = 18 students * $ 348 per course = $ 6,264

Cost for Kenton university = $ 5382 per course, it does not depend upon the students so cost will be same.

cost for Denton university = 18 students * $ 299 per student = $ 5382.

Thus,

Income Statement
University Kenton Denton
Tution Revenue $ 6264 $ 6264
Less: Total Cost of Instruction 5382 5382
Net income / (Loss) $ 882 $ 882

B)

Kenton University embarks on a strategy to entice students from Denton University by lowering its tuition to $228 per course. This leads to enrollment of 36 students.

So the revenue = 36 students * $ 228 per student per course = $ 8208 and cost will remain the same as it does not change with the students .

Thus,

Income Statement
University Kenton
Tution Revenue ( 36 students * $ 228 ) $ 8208
Less: Total Cost of Instruction 5382
Net income / (Loss) $ 2826

C)  

Denton University embarks on a strategy to entice students from Kenton University by lowering its tuition to $228 per course. This will increase the students count to 36.

Revenue = 36 students @ 228 per student = $ 8208 and cost of tution = 36 studensts @ 299 per student = $ 10764

Thus,

Income Statement
University Denton
Tution Revenue ( 36 students * $ 228 ) $ 8208
Less: Total Cost of Instruction 10764
Net income / (Loss) $ (2556)

E)

9 students attend a course, and assuming that both universities charge executives a $348 tuition fee per course attended.

The income statement based on 9 students wil be as folllows:

Income Statement
University Kenton Denton
Tution Revenue $ 3132 $ 3132
Less: Total Cost of Instruction 5382 2691
Net income / (Loss) $ ( 2250) $ 441

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