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The executive education (EE) unit at the Business School of Central State University offers both open-enrollment (anyone can sign up) and custom (designed for a
The executive education (EE) unit at the Business School of Central State University offers both open-enrollment (anyone can sign up) and custom (designed for a specific client) executive education programs. CSU has just received an inquiry from a prospective client about its prices for leadership seminars. The prospective dlient wants bids for three altemative activity levels: (1) one seminar with 20 participants, (2) four seminars with 20 participants each (80 participants total), or (3) eight seminars with 140 participants in total. EE's cost analyst has provided the following differential cost estimates: $ 610 110 Setup costs for the entire job Materials costs per participant (brochures, handouts, coffee, lunch, etc.) Differential direct labor costs One seminar Four seminars Eight seminars $1,300 5,300 8,900 n addition o he preceding difere ial costs, EE allocates fixed costs o obs on a direct-labor s bass, at a rate o 70 percent o direct labor costs e uding setup costs). For example, d ect labor costs are S100 E would also charge t e job S70 for fixed costs. EE charges clients for its costs plus 30 percent. For the purpose of charging customers, costs equal the setup costs plus materials costs plus differential labor costs plus allocated fixed costs. EE has enough excess capacity to handie his job with ease Required: a. Assume EE's bid equals the total cost, including fixed costs allocated to the job, plus the 30 percent markup on cost. What should EE bid for each of the three levels of activity? Seminar Number of Total costs Fee Bid b. Compute the differontial cost (including setup costs) and the contribution to profit for each of the three levels of activity. Noto that fixed costs are not differential costs. One Four Eight Differential costs Setup costs Materiais cost Differential labor costs Allocated fixed costs Total differential costs $ Differential bid Contribution to proft
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