Student tuition at ABC University is $150 per semester credit hour. The state supplements school revenue by matching student tuition dollar for dollar. In other words, for each dollar a student pays in tuition, the state pays a dollar that is also considered revenue. Average class size for a typical three hour course is 30 students. Labor costs are $3,000 per class, materials costs the school $10 per student per class and overhead costs are $15,000 per class. For this problem, ABC University measures output as the total amount of revenue generated.
a) What is the multifactor productivity performance for a course at ABC University?
b) Suppose the company wants to improve its multifactor productivity measure by 5% by increasing the student tuition per semester credit hour. What will the new student tuition per semester credit hour need to be assuming that the state will continue to pay the $150 per semester credit hour that will continue to be considered as school revenue?
c) If instructors work an average of 10 hours per week for 16 weeks for each three-credit hour class of 30 students, what is the labor-hours productivity ratio?
d) Suppose the next year, tuition increases to $200 per semester credit hour but the state only pays $80 per semester hour instead of the matching it had previously paid. The instructors worked on average 8 hours per week for 16 weeks for each three credit hours class of 30 students. What is the labor-hours productivity ratio here and what is the percent change from c)?