Solved: State University Business School SUBS offers

several degrees including Bachelor

State University Business School SUBS offers several degrees including Bachelor

State University Business School (SUBS) offers several degrees, including Bachelor of
Business Administration (BBA). The new dean believes in using cost accounting information to
make decisions and is reviewing a staff-developed income statement broken down by the
degree offered. The dean is considering closing down the BBA program because the analysis,
which follows, shows a loss. Tuition increases are not possible. The dean has asked for your
advice. If the BBA degree program is dropped, school administration costs are not expected to
change, but direct costs of the program, such as operating costs, building maintenance, and
classroom costs, would be saved. There will be no other changes in the operations or costs of
other programs.
STATE UNIVERSITY BUSINESS SCHOOL, BBA DEGREE
Degree Income Statement
For the Academic Year Ending June 30
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000
Costs
Advertising—BBA program . . . . . . . . . . . . . . . . . 75,000
Faculty salaries . . . . . . . . . . . . . . . . . . . . . . . . . . 1020,000
Degree operating costs (part-time staff) . . . . . . . 130,000
Building maintenance . . . . . . . . . . . . . . . . . . . . . 185,000
Classroom costs (building depreciation) . . . . . . . 425,000
Allocated school administration costs . . . . . . . . . 215,000
Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,050,000
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (50,000)

Required
What revenues and costs are probably differential for the decision to drop the BBA program?
What will be the net effect on the SUBS contribution (profit) if the BBA program is dropped?

State University Business School SUBS offers several degrees including Bachelor

ANSWER
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bachelor/

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