Question
Kim started a tuition centre on 1 November 2019. The following are the costs compiled for the month of November 2019. Nov 2019 Number of
Kim started a tuition centre on 1 November 2019. The following are the costs compiled for the month of November 2019.
Nov 2019
Number of students 100
Cost of materials $200
Rental $2,000
Salary of staff $10,000
Total cost $12,200
Cost per student $122
Average fees paid by each student $150
Profit per student $28
In December 2019, number of students enrolled was only half that of November 2019. Based on the profit per student, Kim expects a profit of $1,400 ($28 X 50).
Using cost behaviour analysis, explain why Kim should not earn $1,400 for December 2019. What should be the correct profit/ loss for December 2019?
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