Atlantic University has 8 schools 350 faculty members and 20,000 students. An analysis of the university’s cost structure yielded the following annual cost estimates.
The university sustaining cost levels is $20,000,000, which includes basic building costs, admin salaries like president and admissions offices. Committed costs at the university level increase in the long run, by $20,000,000 for each new school added and by $1000 for each additional student enrolled.
The school of business is a school in Atlantic University. The school sustaining cost level is $5,000,000. The area sustaining cost level is $50,000. Committed costs in the School of Business increase, in the long run, by $200,000 for each faculty member added and by $500 for each unit of student capacity added. Planner at the university estimate that the total flexible costs per student amount to $600 (all the costs above are annual costs).
Each faculty member teaches 5 courses and each student takes 9 courses per year.
The accounting area in the school of business has 30 faculty members and is offering 150 courses with, on average 60 students in each course. Only accounting students take the course.
1. What is the total annual cost per accounting student?
2. What is the total annual cost of the accounting program?
3. The dean is considering the shift of faculty workload. The shift will result in each faculty member teaching 4 course per year. The number of students course enrollments will be unchanged. How will this change affect the cost per student? How will it affect the cost of the accounting program?
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