Required information
[The following information applies to the questionsdisplayed below.]
Professor John Morton has just been appointed chairperson of theFinance Department at Westland University. In reviewing thedepartment’s cost records, Professor Morton has found the followingtotal cost associated with Finance 101 over the last fiveterms:
| Term | Number of
Sections Offered | Total Cost |
| Fall, last year | | 4 | | $ | 10,000 |
| Winter, last year | | 7 | | $ | 13,000 |
| Summer, last year | | 3 | | $ | 8,000 |
| Fall, this year | | 2 | | $ | 7,500 |
| Winter, this year | | 5 | | $ | 12,000 |
|
Professor Morton knows that there are some variable costs, suchas amounts paid to graduate assistants, associated with the course.He would like to have the variable and fixed costs separated forplanning purposes.
3-a. Assume that because of the small number of sections offeredduring the Winter Term this year, Professor Morton will have tooffer eight sections of Finance 101 during the Fall Term. Computethe expected total cost for Finance 101.
3-b. Can you see any problem with using the cost formula from(2) above to derive this total cost figure?
