State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and is reviewing a staff-developed income statement broken down by the degree offered. The dean is considering closing down the BBA program because the analysis, which follows, shows a loss. Tuition increases are not possible. The dean has asked for your advice. If the BBA degree program is dropped, school administration costs are not expected to change, but direct costs of the program, such as operating costs, building maintenance, and classroom costs, would be saved. There will be no other changes in the operations or costs of other programs.

RequiredWhat revenues and costs are probably differential for the decision to drop the BBA program? What will be the net effect on the SUBS contribution (profit) if the BBA program is dropped? Is there any other information you would like to have before recommending whether or not to drop the BBA program?

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STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREE Degree Income State ment For the Academic Year Ending June 30 Revenue $6,000,000 Costs Advertising-BBA program 225,000 Faculty salaries 3,060,000 Degree operating costs (part- 390,000 time staff) Building maintenance 555,000 Classroom costs (building 1,275,000 depreciation) Allocated school administration 645.000 costs Total costs $6,150,000 Net loss $ (150,000)