Problem

University AAA is organized into four colleges with the following characteristics: Business Engineering Science Humanities Number of majors 10,000 9,000 9,600 2,400 Number of non-majors taking classes 2,000 1000 4,800 7,200 Revenue from student fees $1,200,000 $1,000,000 $1,440,000 $960,000 Revenue from external grants $400,000 $3,000,000 $1,600,000 $240,000 Variable cost per student $35.00 $65.00 $80.00 $25.00 Fixed cost per student (based on total students) $35.00 $65.00 $25.00 $10.00

A. List three items that would likely be included in the category of variable costs per student from the perspective of each college.

b. List two items that would likely be included as fixed costs per student from the perspective of each college.

c. Calculate the contribution margin per student from the perspective of each college and then from the perspective of the university as a whole.

d. Calculate the total profit from the perspective of each college and then for the university as a whole

e. Based on financial considerations alone, identify the college that would be most likely to be dropped from the university during a budget crisis. Then identify the candidate that would least likely be dropped.