Serena (Venus) Williams has come to you with three different options she is considering attracting more students in July. The three options are:

Option #1 Half-Price Sale in July: Although she normally charges $60 per lesson, she is considering have a 1/2 price sale in July, offering lessons at $30 each during the month of July only, if students sign up before May 1^st. If she goes with this option, she will advertise this to her current students by sending home flyers to their parents and posting signs in the facility. She expects the extra advertising will increase the cost per lesson by $.25 (cents). If she does this, she believes she will sell 2,100 lessons in July.

Option #2 July Package Discount: To encourage students to sign up for multiple lessons at a time, she is offering lessons in a package of 4 lessons for $200 during the month of July (so each lesson is $50). To advertise this, she plans to send flyers home with existing students, which will increase the variable cost per lesson by $.25 (cents), but she also will run ads in the local paper, which will cost him an extra $5,000. If she does this, she thinks she can offer 2,500 lessons in July.

Option #3 Keep Current Pricing: She can just keep her pricing at $60 per lesson and try advertising at the local schools. If she does this, her advertising costs will increase $1,000. Based on last years results, she anticipates offering 1,975 lessons. She is depending on you to help her through this dilemma.

Which option should she choose?

Option #1 Half-Price Sale in July _____

Option #2 July Package Discount _____

Option #3 Keep Current Pricing x

Decision Point: Sales Revenue

Based upon your prior analysis, suppose you have developed the following cost equation: $13.50X + $27,850

To encourage students to sign up for multiple lessons at a time, Serena is offering lessons in a package of 4 lessons for $200 during the month of July (so each lesson is $50). To advertise this, she plans to send flyers home with existing students, which will increase the variable cost per lesson by $.25, but she also will run ads in the local paper, which will cost him an extra $5,000 in fixed costs. If she does this, she thinks she can offer 2,500 lessons in July.

Given this information, what will sales revenues be for July? Show your work.

$120,000 _____

$125,000 _____

$118,500 _____

$ 63,000 _____

Decision Point: Variable Costs

Based upon your prior analysis, suppose you have developed the following cost equation: $13.50X + $27,850

Ms. Williams will offer lessons at $50 each. She anticipates variable costs per lesson will increase by $.25, and fixed costs will increase by $5,000. With this option, she anticipates she will offer 2,500 lessons in July.

Given this information, what will the variable costs be for July? Show your work.

$27,850 _____

$32,850 _____

$34,375 _____

$33,750 _____

Decision Point: Fixed Costs

Based upon your prior analysis, suppose you have developed the following cost equation: $13.50X + $27,850

Ms. Williams will offer lessons at $50 each. She anticipates variable costs per lesson will increase by $.25, and fixed costs will increase by $5,000. With this option, she anticipates she will offer 2,500 lessons in July.

Given this information, what will the fixed costs be for July? Show your work.

$27,850 _____

$32,850 _____

$34,375 _____

$28,475 _____

Decision Point: Operating Income

Based upon your prior analysis, suppose you have developed the following cost equation: $13.50X + $27,850

Ms. Williams will offer lessons at $50 each. She anticipates variable costs per lesson will increase by $.25, and fixed costs will increase by $5,000. With this option, she anticipates she will offer 2,500 lessons in July.

Given this information, what will operating income be for July? Show your work.

$63,000 _____

$90,625 _____

$62,775 _____

$57,775 _____

$92,150 _____