Case Scenario:
Cooper Training Service (CTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers a course on the clients' equipment. The only major expense CTS incurs is instructor salaries; it pays instructors $3,600 per course taught. CTS recently agreed to offer a course of instructors to the employees of Akers Incorporated at a price of $340 per student. Akers estimated that 20 students would attend the course.
Question 1: Relative to the number of students in a single course, is the cost of instruction a fixed or a variable cost?
Question 2: Determine the profit, assuming that 20 students attend the course.
Question 3: Determine the profit, assuming a 20 percent increase in enrollment, enrollment increases to 24 students). What is the percentage change in profitability?
Question 4: Determine the profit, assuming a 20 percent decrease in enrollment, (enrollment decreases to 16 students). What is the percentage change in profitability?
Question 5: Explain why a 20 percent shift in enrollment produces more than 20 percent shift in profitability. Use the term that identifies this phenomenon.