Question

Required information (The following information applies to the questions displayed below) Thornton Training Services (TST) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients' offices on the clients' equipment. The only major expense TST incurs is instructor salaries it pays instructors $5,700 per course taught. TST recently agreed to offer a course of instruction to the employees of Novak Incorporated at a price of $460 per student. Novak estimated that 20 students would attend the course Base your answers on the preceding information Required 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 10 percent increase in enrollmente, enrollment increases to 22 students). What is the percentage change in profitability? d. Determine the profit, assuming a 10 percent decrease in enrollmente enrollment decreases to 18 students) What is the percentage change in profitability?

Answer 1

a.	Fixed Cost
	The cost of instruction is $5,700
b.	Revenue (460*20)	$9,200
	Less: Cost	$5,700
	Profit	$3,500
c.	Revenue (460*22)	$10,120
	Less: Cost	$5,700
	Profit	$4,420
	Change in profitability	26.29%
	(4420-3500)/3500
d.	Revenue (460*18)	$8,280
	Less: Cost	$5,700
	Profit	$2,580
	Change in profitability	-26.29%
	(2580-3500)/3500