Assume You Are An Analyst With An Online University Say UOP

Assume You Are An Analyst With An Online University Say Uop The Admis

Assume you are an analyst with an online university, specifically UOP. The Admissions Director (AD) wants to determine the optimal number of students for each ECO561 class. You are provided with the following data: Tuition fee is $1250 per student. Instructor pay is $2500. Other incidental (variable) costs amount to $1000.00. Variable costs increase by 10% for each additional student. The task is to determine the recommended number of students for the AD, calculate the profit for the given number of students, assess if this is the profit-maximizing number, and analyze how changes in variable costs (from 10% to 15%) affect the profit-maximizing number and the role of the marginal rule (MR=MC) in this context.

Paper For Above instruction

The primary objective of this analysis is to determine the optimal number of students for the ECO561 class at UOP, considering variable costs, tuition revenue, and the principles of profit maximization. By understanding the cost structures and applying economic concepts such as marginal cost and marginal revenue, we can identify the ideal class size that maximizes profit for the institution.

Initially, fixed costs include instructor pay of $2,500 and incidental costs of $1,000, totaling $3,500. The revenue per student is set at $1,250. The variable costs start at a base of $1,000 but increase by 10% for each additional student. To accurately analyze the profit, it is essential to model these costs and revenues as functions of the number of students (denoted as Q).

The total variable cost (VC) consists of the base incidental cost plus the incremental costs due to additional students. When the first student enrolls, variable costs are $1,000, which increases by 10% with each subsequent student. This leads to a geometric series where each additional student's variable cost is multiplied by 1.10 compared to the previous one. The total variable cost (TVC) for Q students can be approximated as:

TVC(Q) ≈ 1000 * [(1.10^Q - 1) / 0.10]

This formula sums all incremental costs, illustrating how costs escalate with class size.

The total revenue (TR) from Q students is:

TR = 1250 * Q

The total cost (TC) includes fixed and variable costs:

TC(Q) = Fixed Costs + TVC(Q) = 3500 + 1000 * [(1.10^Q - 1) / 0.10]

From these, the profit function (π) can be expressed as:

π(Q) = TR - TC = (1250 Q) - [3500 + 1000 ((1.10^Q - 1) / 0.10)]

To find the optimal class size, we evaluate the marginal revenue (MR) against the marginal cost (MC). The marginal revenue per additional student remains constant at $1,250 since each added student pays the same tuition fee. The marginal cost (MC) is the derivative of total cost with respect to Q, considering the increasing variable costs.

Graphically and analytically, the profit-maximizing number of students occurs where MR equals MC. In the case of increasing variable costs by 10%, the marginal cost for each additional student can be approximated as:

MC(Q) ≈ d(TC)/dQ = derivative of TC with respect to Q, considering the geometric increase in VC.

For simplicity, when variable costs increase at a constant rate, the marginal cost for each additional student is approximately:

MC ≈ 1000 * 1.10^(Q-1) (incremental cost per student)

Setting MR = MC:

1250 = 1000 * 1.10^(Q-1)

Solving for Q:

1.10^(Q-1) = 1.25

Q - 1 = log(1.25) / log(1.10) ≈ 0.09691 / 0.04139 ≈ 2.343

Q ≈ 3.343 + 1 ≈ 4.34

Since the number of students must be integer, the optimal Q is approximately 4 students for the initial scenario with 10% cost increase.

Calculating the profit at Q=4:

TR = 1250 * 4 = 5000

TVC ≈ 1000 [(1.10^4 - 1) / 0.10] = 1000 (1.4641 - 1) / 0.10 = 1000 0.4641 / 0.10 = 1000 4.641 = 4641

Total cost, TC = 3500 + 4641 = 8141

Profit, π = 5000 - 8141 = -3141 (a loss at this class size, suggesting larger class sizes might be more profitable after recalculations or that the simplified model needs refinement).

Adjustments to the model or constraints might shift the optimal class size to a different number. However, the core principle remains: the profit is maximized where MR equals MC. When variable costs increase by 15%, the marginal cost for each additional student rises faster, leading to an even lower optimal class size. Repeating the calculation with the 15% increase:

MC ≈ 1000 * 1.15^{Q-1}

1250 = 1000 * 1.15^{Q-1}

1.15^{Q-1} = 1.25

Q - 1 = log(1.25) / log(1.15) ≈ 0.09691 / 0.13976 ≈ 0.694

Q ≈ 1 + 0.694 ≈ 1.694, suggesting a smaller ideal class size when costs increase more rapidly.

This analysis demonstrates the critical role of marginal analysis—the marginal rule (MR=MC)—in guiding decision-making regarding class sizes. It underscores that profit maximization occurs where the additional revenue from enrolling one more student equals the additional cost incurred by that student. When variable costs escalate quickly, the optimal class size diminishes accordingly to prevent losses. Conversely, if variable costs grow more slowly, larger class sizes remain viable options.

In conclusion, effective application of marginal analysis enables UOP to optimize class sizes, ensuring profitability while managing costs efficiently. The precise optimal number depends heavily on the rate at which variable costs increase, highlighting the importance of accurate cost modeling and continuous financial analysis in educational administration.

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