Answered step by step
Verified Expert Solution
Question
1 Approved Answer
State University Business School (SUBS) oilers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make
State University Business School (SUBS) oilers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and is reviewing a staff-developed income statement broken down by the degree offered. He dean is considering closing down the BBA program because the analysis, which follows, shows a loss. Tuition increases are not possible. The dean has asked for your advice. If the BBA degree program is dropped, school administration costs are not expected to change, but direct costs of the program, such as operating costs, building maintenance, and classroom costs, would be saved. There will be no other changes in the operations or costs of other programs. Required What revenues and costs are probably differential for the decision to drop the BBA program? What will be the net effect on the SUBS contribution (profit) if the BBA program is dropped? Is there any other information you would like to have before recommending whether or not to drop the BBA program? Refer to the information in Exercise 1-29. The dean or the Business School is considering expanding the BDA program by offering an evening program in a nearby city. The new evening program would be the same size (in terms of students). The school's CFO estimates that the combined BBA revenue (on-campus plus the evening program) will be twice the current revenue, as shown in Exercise 1-29. Because the evening program will be new, advertising expenses for the evening session will be three times their current level. Faculty salaries will double. Degree operating costs will increase by 50 percent. Building maintenance and classroom costs will remain unchanged, but classroom space will be rented at a cost of $300,000 per academic year. School administration costs will increase by $30,000, and allocated school administration costs (for both programs) will be $780,000 per academic year. Required a. What will the contribution of the combined BBA program be, given these estimates? b. Are there other factors the dean should consider before making a decision
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started