Barbara Maxton, the dean of a leading business school, is wrestling with a problem created by the surge in enrollment for a course entitled "Strategic Cost Management." This course currently is offered in a 20-seat classroom because the instructor uses a seminar format that relies heavily on student involvement. Projects and exams test students' critical faculties, requiring students to integrate material from several prerequisite classes. Strategic Cost Management has become a very popular course. This semester, enrollment exploded-the course hit its enrollment cap on the first day, and another 15 students have e-mailed Dean Maxton expressing their desire to take the course. Dean Maxton is considering the following three options after considering and discarding several others:

1. Cap enrollment at 20 students. Students can always take the class the following semester or register for an alternative class. Strategic Cost Management is not required for any degree program (i.e., it is an elective course).

2. Cancel another class with low (six students currently) enrollment to free up another 20-seat classroom. Hire an instructor for $20,000 to teach the second section. Opening a new section requires Dean Maxton to cancel an existing class because all available classrooms are fully scheduled.

3. A class that currently is scheduled in a 45-seat classroom has only 19 enrolled students. The dean can switch the room assignments, thereby opening up the Strategic Cost Management course to more students. The current instructor for the course, however, has indicated that she cannot follow the same teaching style with 35 or more students-the format has to become more lecture-oriented. Moreover, the examinations will have more multiple-choice and fewer open-ended questions that challenge students' critical faculties.

Dean Maxton knows that most, if not all, of the students who take Strategic Cost Management carry a full course load (15 credit hours per semester). She also knows that tuition does not increase once a student enrolls for nine credit hours (e.g., a student taking 15 credit hours pays the same tuition as a student taking nine credit hours).

Required:

What costs and benefits should Dean Maxton consider in making her decision?