A couple of entrepreneurial business students at State University decided to put their education into practice by developing a tutoring company for business students. While private tutoring was offered, it was determined that group tutoring before tests in the large statistics classes would be most beneficial.
The students rented a room close to campus for $300 for 3 hours. They developed handouts based on past tests, and these handouts (including color graphs) cost $5 each. The tutor was paid $25 per hour, for a total of $75 for each tutoring session.
(a) If students are charged $20 to attend the session, how many students must enroll for the company to break even?
(b) A somewhat smaller room is available for $200 for 3 hours. The company is considering this possibility. How would this affect the break-even point?