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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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