1. Company ABC starts an educational program in collaboration with Institute XYZ. As per the agreement, ABC and XYZ will share profit in 60 : 40 ratio. The initial investment of Rs.100,000 on infrastructure is borne entirely by ABC whereas the running cost of Rs. 400 per student is borne by XYZ. If each student pays Rs. 2000 for the program find the minimum number of students required to make the program profitable, assuming ABC wants to recover its investment in the very first year and the program has no seat limits.
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By: anil on 05 May 2019 02.36 am
For program to be profitable both companies must recover costs before they can start making profits. Since, ABC wants to recoup investment in the first year and there is no limit of number of students, profits can only be shared after both companies can reach a situation of minimum profits (zero profit), which would be: Let x be minimum number of students required to reach a situation of minimum profits (in this case 0).
Comparing total costs and revenues : => $$400x + 100000 = 2000x.$$ => $$x = frac{100000}{(2000 - 400)} = 62.5 = 63$$
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Comparing total costs and revenues : => $$400x + 100000 = 2000x.$$ => $$x = frac{100000}{(2000 - 400)} = 62.5 = 63$$