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3. The director of a nonprofit foundation that sponsors 8-week
summer institutes for graduate students analyzed the costs
and expected revenues for the next summer institute and
recommended that the session be canceled. In her analysis
she included a share of the foundation’s overhead—the
salaries of the director and staff and costs of maintaining the
office—to the program. She estimated costs and revenues as
follows:
Projected revenues (from tuition and fees) $300,000
Projected costs
Overhead

$ 50,000

Room and board for students

$100,000

Costs for faculty and miscellaneous

$175,000

Total costs

$325,000

What was the error in the director’s recommendation?
4. The table below shows the total cost of cleaning classrooms:
Classrooms cleaned per evening
Total cost

0

3

7

12

16

17

$100 $200 $300 $400 $500 $600

1. What is the average fixed cost of cleaning three classrooms?
2. What is the average variable cost of cleaning three
classrooms?
3. What is the average fixed cost of cleaning seven classrooms?

Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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