Suppose that a private college offers a variety of (in-person) skills training courses. The college currently offers 12 courses per term, with an average enrolment of 45 students per course, and charges student fees of $2,000 per course.

The college's financial manager reports that the college currently has the following costs:

Staff Costs

Administrators' salaries: $500,000 per term

(Full-time) support staff salaries: $200,000 per term

(Casual) Teachers' salaries: $10,000 per course

**Building costs**(The building is owned by the college.)

Building maintenance: $125,000 per term

Room preparation and cleaning: $3,000 per course ($0 if a room is not used)

The college is considering offering a new computer training course. Based on in-house market research, the college believes that the computer training course will attract between 20-25 students. The college's financial manager has made the following recommendation:

"My advice is not to offer this course. The current cost to the college of running a course is $81,750. With the current student fees, a course must have at least 41 enrolments to be cost effective, and this course is not expected to meet that threshold."

Suppose that the CEO of the college has consulted you about this decision. Explain whether (1) you agree with the financial manager's assessment and (2) whether you would recommend offering the course. Did you have to make any assumptions to arrive at your recommendation? What is at least one factor that could change your recommendation?

NOTE:

• Clearly explains why the financial manager's assessment is correct or incorrect.
• Clearly explains the rationale for the recommendation.
• Identifies any necessary assumptions and at least one factor that would change the recommendation.
• The analysis is generally correct.
• The overall exposition is clear and sufficiently detailed to effectively communicate the main ideas.