Kenton and Denton Universities offer executive training courses to corporate clients. Kenton pays its instructors $5,000 per course taught. Denton pays its instructors $250 per student enrolled in the class. Both universities charge executives a $450 tuition fee per course attended.

Required

Prepare income statements for Kenton and Denton, assuming that 20 students attend a course.

Kenton University embarks on a strategy to entice students from Denton University by lowering its tuition to $240 per course. Prepare an income statement for Kenton assuming that the university is successful and enrolls 40 students in its course.

Denton University embarks on a strategy to entice students from Kenton University by lowering its tuition to $240 per course. Prepare an income statement for Denton, assuming that the university is successful and enrolls 40 students in its course.

Problem 11-28

a. N = Number of units to break-even point

Sales Variable cost Fixed cost = Desired Profit

(Sales price x N) (Variable cost per unit x N) = Fixed cost + Desired Profit

(Contribution margin per unit x N) = Fixed cost + Desired Profit

N = (Fixed cost + Desired Profit) Contribution margin per unit

N = ($ + $ ) [$ - ($ + $ )] = Units

Break-even point dollars = Units x $ selling price per unit = $

b. N = Number of units to break-even point

N = (Fixed cost + Desired Profit) Contribution margin per unit

N = ($ + $ ) [$ ($ + $ )]

N = Units

Break-even point dollars = Units x $ selling price per unit = $

	c.

Contribution Margin Income Statement
Sales ($ x Units)	$
Variable costs ($ x )
Contribution margin	$
Fixed costs
Net Income	$