State University Business School (SUBS) offers several degrees, including Bachel

Question

State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREE Degree Income Statement For the Academic Year Ending June 30 2,030,000 Revenue Costs Advertising- BBA program 78,000 1,035,000 Faculty salaries Degree operating costs (part-time staff Building maintenance Classroom costs (building depreciation) Allocated school administration costs 145,000 188,000 428,000 218,000 Total costs 2,092,000 Net loss $ -62,000 The dean program in a nearby city. The program would be the same si estimates that the combined BBA revenue (on-campus plus the evening program) will be twice the current revenue, as shown in the above table. Because the evening program will be new, a the evening session will be three times their current level. Faculty salaries will double Degree operating costs will increase classroom space will be rented at a cost of $115.000 per academic year. School administration costs will increase by $13.000, and allocated school administration costs (for both programs) will be $275,000 per academic year of the Business School is considering expanding the BBA program by offering an evening ze (in terms of students). The school's CFO n the above table. Because the evening program will be new, advertising expenses for be three times their current level. Faculty salaries will double. Degree operating by 50 percent. Building maintenanoe and dlassroom costs will remain unchanged, but Required

Explanation / Answer

1)

b) The success of evening program even after advertising should be considered before making investment in it

Revenue   (2 * 2,030,000) 4,060,000 Less cost Advertising cost   (3*78000) 234000 Faculty salaries (2*1035000) 2,070,000 operating cost   [145000(1+.50)] 217500 Maintenance 188,000 classroom cost 428,000 Renatal 115,000 allocated cost 275000 Total cost 3,527,500 Net income 532500

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