FDU Inc. has conducted an extensive review of their cost structure and categoriz

Question

FDU Inc. has conducted an extensive review of their cost structure and categorized their fixed and variable costs as follows:

           Fixed

          Office Rent

          Administrative Salaries & Benefits

           Variable

           Trainers Wages – paid on a per training session basis - $1,000

           Training session materials - $75/student

FDU charges customers $3,000 for a one day training session. A potential customer is not willing to pay $3,000, but will pay $2,000. Four students will attend the training session. Jennifer, FDU CEO, would like to meet with you, the Controller, to discuss what can be done to accommodate this customer’s needs. What would you propose?

Explanation / Answer

Since no Fixed cost is given therefore we have to consider only variable cost Case A Case B Revenue $3,000 $2,000 Trainer Wages $1,000 $1,000 Session mat for 4 student $300 $300 Net Revenue 1700.00 700.00 The controller should propose atlease 1700 in case 1 and 700 in case 2

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