Question

The executive educaton (EE) unt at the Business School of Central State University offers both opan-enrollment (anyone can sign un, and custom designed for a specific client) executive education programs, CSU has just received an inquiry from a prospective client about its prices for leadership serinars. The prospective dierl wants bids for three alternative activity levels: (1) une seminar with 20 particiganis, 2) four minars with 20 participants each 180 articipants lial), Dr (3) eighi serninars with 140 participants in talal. Es cast analyst has provided the following differential cost estimates: $ 590 120 Setup costs for the entire ob Materiale costs per partiupan brochures, handouts, coffee, lunch, etc.) Differential direciabor costs: One seminer 5 1.100 In addition to the preceding differerilial custs, EE allocales lixed costs la juus on a direct-labor-cool basis al arale of 80 percent of direct labor cosis excluding selup costs). For example, if direct labor costs are S100, EE would also charge the job 380 for fixed costs. EE charges clients forts costs plus 20 percent. For the purpose of charging customers, costs equal the setup costs plus materials costs plus differential labor costs plus allocated fixed costs. EE has enough exc888 capacty to handle this job with ease. Required: a. Assumn EE's bid equals the total cost, including fed casts allocated to the job, plus the 20 ocent markup an cost. What should EE bid for each of the three levels of activity? One Saminar Four Seminars Seminars Number of participants Tatal costs Bid b. Campute the differential cost (inclucing setup costs) and the contribution to profit for each of the three levels of activity. Note that fixed costs are not differential costs. Seminar Seminars Eight Seminars Differential costs: Echip coats Materials cost Differential labor costs Allocated fixed costs Total differential custo Differential bid Contribution to ancit s

Answer 1

a.
	One Seminar	Four Seminars	Eight Seminars
Number of Participants	20	80	140
Total Costs	5070	19470	33150
Fee	1014	3894	6630
Bid	6084	23364	39780
b.
	One Seminar	Four Seminars	Eight Seminars
Differential Costs:
Setup Costs	690	690	690
Materials Cost	2400	9600	16800
Differential Labour Costs	1100	5100	8700
Allocated Fixed Costs	880	4080	6960
Total Differential Costs	4190	15390	26190
Differential Bid	6084	23364	39780
Contribution to Profit	1894	7974	13590
c-1
	One Seminar	Four Seminars	Eight Seminars
Bid	6084	23364	35802
Incremental Costs:
Setup Costs	690	690	690
Materials Cost	2400	9600	16800
Differential Labour Costs	1100	5100	8700
Total Incremental Costs	4190	15390	26190
Contribution to Profit	1894	7974	9612
c-2
Disagree
(Because even if client pays 90% of bid price for the eight seminar package, Contribution in Eight seminars will be higher than Four Seminars. So the EE should select Eight Seminars.)