Question
Greystone College is a provider of correspondence courses in Business Studies. Each course was sold for 45.00 last year and a total of 20,000 were
Greystone College is a provider of correspondence courses in Business Studies. Each course was sold for 45.00 last year and a total of 20,000 were sold. The fixed overheads for the year were 80,000
The variable cost of producing a course last year was:
Direct material | 15.00 |
Direct labour | 18.00 |
Other direct costs (mainly postage) | 1.80 |
Variable overheads | 1.20 |
During the year, the costs are expected to increase as follows:
Direct material | 20.00 |
Direct labour | 16.67 |
Other direct costs | 67.00 |
Variable overheads | 25.00 |
Fixed overheads | 5.00 |
If price rises are less than 17.5%, demand will not be affected. If price rises exceed 17.5%, sales will fall by 2% for each 1% in excess of 17.5%.
Required: Find the selling price of the study courses if the number of courses sold and the annual profits are to remain the same.
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