D is corrent. This response appropriately omits the costs which have already been incurred—promotional advertising ($1,250), the 20% down payment to the instructor ($750 × .2 = $150), and the nonrefundable room rental and setup fee ($200)—from the fixed cost calculations [$2,400 – ($1,250 + $150 + $200) = $800] because they are sunk costs. The variable cost figure is still relevant and, thus, is unchanged.
A is incorrect. This response includes only the incurred (sunk) costs—promotional advertising ($1,250), the 20% down payment to the instructor ($750 × .2 = $150), and the nonrefundable room rental and setup fee ($200)—as the fixed costs ($1,250 + $150 + $200 = $1,600). The variable cost figure is still relevant and, thus, is unchanged.
B is incorrect. This response represents the average costs for the 25 persons already registered if sunk costs are used in place of additional fixed costs {[$1,600 + ($55 × 25)] ÷ 25 = $119}.
C is incorrect. This response represents the original cost function which is not correct because it includes the costs which have already been incurred and are now sunk costs. The variable cost figure is still relevant and, thus, is unchanged.
|
