Atlantic University has eight 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 level is $20,000,000, which includes basic building
costs and administrative salaries such as those of the president and the admissions officers.
Committed costs at the university ievel increase, in the long run, by $20,000,000 for
each new school added and by $ 1 000 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. Planners at Atlantic University estimate
that the total flexible costs per student amount to $600. (All the costs above are annual
costs.)
Each faculty member teaches five courses and each student takes nine 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. Accounting students only
take accounting courses.
Required
( 1 ) What is the total annual cost per accounting student?
(2) What is the total annual cost of the accounting program?
(3) The dean of the School of Business is considering a shift in faculty workload to provide
more incentive for research. The shift will result in each faculty member teaching four
courses per year. The number of student course enrollments will be unchanged. How
will this change affect the cost per student? How will it affect the cost of the accounting
program?