Sign In Sign Up Ask an AI advisor
abbeyeasterwood
abbeyeasterwood
07.04.2020 • 
Mathematics

Check my work
Stuart Academy is a profit-oriented education business. Stuart provides remedial training for high school students who have fallen
behind in their classroom studies. It charges its students $1.255 per course. During the previous year, Stuart provided instruction for
1,000 students. The income statement for the company follows:
6.67
points
Revenue
Cost of instructors
Overhead costs
Net income
$1,255,000
(806, 000)
(357,500)
$ 91,500
eBook
The company president, Andria Rossi, indicated in a discussion with the accountant, Sam Trent, that she was extremely pleased with
the growth in the area of computer-assisted instruction. She observed that this department served 300 students using only three part-
time instructors. In contrast, the classroom-based instructional department required 28 instructors to teach 700 students. Ms. Rossi
noted that the per-student cost of instruction was dramatically lower for the computer-assisted department. She based her conclusion
on the following information:
Print
References
Stuart pays its part-time instructors an average of $26,000 per year. The total cost of instruction and the cost per student are
computed as follows:
Computer-Assisted
classroom
Type of Instruction
Number of instructors (a)
Number of students (b)
Total cost ( = a × $26,000)
Cost per student (c + b)
300
$78,000
260
700
$728,000
$ 1,040
Assuming that overhead costs were distributed equally across the student population, Ms. Rossi concluded that the cost of instructors
was the critical variable in the company's capacity to generate profits. Based on her analysis, her strategic plan called for heavily
increased use of computer-assisted instruction.
Mr. Trent was not so sure that computer-assisted instruction should be stressed. After attending a seminar on activity-based costing
(ABC), he believed that the allocation of overhead cost could be more closely traced to the different types of learning activities. To
facilitate an activity-based analysis, he developed the following information about the costs associated with computer-assisted versus
classroom instructional activities. He identified $276.000 of overhead costs that were directly traceable to computer-assisted activities,
including the costs of computer hardware, software, and technical assistance. He believed the remaining $81,500 of overhead costs
should be allocated to the two instructional activities based on the number of students enrolled in each program

Solved
Show answers

Ask an AI advisor a question

I want advice