Question

Kenton and Denton Universities offer executive training courses to corporate clients. Kenton pays its instructors $6,405 per course taught. Denton pays its instructors $305 per student enrolled in the class. Both universities charge executives a $349 tuition fee per course attended.
A. Prepare income statements tor Kenton and Lenton, assuming that 21 students athend a course.
B. Kenton University embark on a strategy to entice students from Denton University by lowering its tuition to $240 per course. Prepare an income statement for Kenton assuming that the university is successful and enrolls 40 students in its course.
C. Denton University embarks on a strategy to entice students from Kenton University by lowering its tuition to $240 per course. Prepare an income statement for Denton, assuming that the university is successful and enrolls 40 students in its course.
D. Prepare income statements for Kenton and Denton Universities, assuming that 10 students attend a course, and assuming that both universities charge executives a $450 tuition fee per course attended.

Answer 1

Answer:

Kenton and Denton Universities

A. Income Statements

                                    Kenton        Denton

Tuition Revenue         $7,329       $7,329

Instructors' Salaries     6,405         6,405

Net Income                   $924          $924

B. Kenton University embark on a strategy to entice students from Denton University by lowering its tuition to $240 per course.

Income Statement for Kenton University:

Tuition Revenue         $9,600

Instructors' Salaries     6,405

Net Income                 $3,195

C. Denton University embarks on a strategy to entice students from Kenton University by lowering its tuition to $240 per course.

Income Statement for Denton University:

Tuition Revenue         $9,600

Instructors' Salaries    12,200

Net Income (Loss)    ($2,600)

D. Income Statement for Kenton and Denton Universities:

                                    Kenton        Denton

Tuition Revenue         $4,500       $4,500

Instructors' Salaries     6,405          3,050

Net Income/(Loss)     ($1,905)       $1,450

Explanation:

a) Data and Calculations:

Kenton University:

Salaries to instructors per course = $6,405

Tuition fee per course = $349

Denton University:

Salaries to instructors per student = $305

Tuition fee per course = $349

b) Kenton and Denton Universities' costs are determined by their nature based on whether they are fixed or variable.  These costs also determine the level of net income to be recorded by each university.