Question: Midstate University is trying to decide whether to allow 100 more students into the university. Tuition is $5000 per year. The controller has determined the following schedule of costs to educate students:

Number of Students Total Costs

4000 $30,000,000

4100 30,300,000

4200 30,600,000

4300 30,900,000

The current enrollment is 4200 students. The president of the university has calculated the cost per student in the following manner: $30,600,000/4200 students = $7286 per student. The president was wondering why the university should accept more students if the tuition is only $5000.

a. What is wrong with the president's calculation?

b. What are the fixed and variable costs of operating the university?