In chapter 2, Principles of Managerial Economics, I distinction is made between accounting and economics. There are key measures and relationships significant to both. Every types of business operation attempts to generate a positive profit based on data analysis and fiscal projections. Nyack College as a higher education institution sells societal and industrial advancement through advanced education. ” If a business properly measures costs from an economic perspective, ignoring sunk costs and including opportunity costs, you can conclude that a venture is worth pursuing if it results in an economic profit of zero or better. (pp.7)”

QUESTION

In chapter 2, Principles of Managerial Economics, I distinction is made between accounting and economics. There are key measures and relationships significant to both. Every types of business operation attempts to generate a positive profit based on data analysis and fiscal projections. Nyack College as a higher education institution sells societal and industrial advancement through advanced education.

” If a business properly measures costs from an economic perspective, ignoring sunk costs and including opportunity costs, you can conclude that a venture is worth pursuing if it results in an economic profit of zero or better. (pp.7)”

For this assignment, you will write a 3-5 page paper that will explain your understanding of profit function of Nyacks’ cohort model or your company. Use the information about the cohort, total cost to attend Nyack College, etc., to substantiate your explanation, and determine the “breakeven point for Nyack College using the cohort model.

ANSWER

Analyzing the Profit Function of Nyack College’s Cohort Model

Introduction

In the realm of managerial economics, it is crucial to understand the distinction between accounting and economics, as both disciplines provide different perspectives on measuring costs and determining profitability (Wokutch et al., 2017). This essay aims to explore the profit function of Nyack College’s cohort model, a higher education institution focused on societal and industrial advancement through advanced education. By analyzing relevant information about the cohort, total cost to attend Nyack College, and other factors, we can determine the breakeven point for the institution using the cohort model.

Understanding Economic Profit and Its Significance

Economic profit is a fundamental concept in managerial economics that takes into account both explicit and implicit costs (Tuovila, 2022). It emphasizes the inclusion of opportunity costs and the exclusion of sunk costs when evaluating the profitability of a venture. By considering these factors, businesses can make informed decisions about pursuing ventures that generate a positive economic profit.

Applying Economic Profit to Nyack College

Nyack College, as a higher education institution, provides educational services to its students. To assess the profit function of Nyack College’s cohort model, we need to consider the relevant costs and revenues associated with its operations.

Cost Analysis

Total Cost: Nyack College incurs various costs, including faculty salaries, administrative expenses, facility maintenance, and other operational costs. These costs are typically accounted for as explicit costs.

Opportunity Cost: In the context of Nyack College, opportunity costs arise from the foregone alternative uses of its resources. For instance, the faculty members’ time spent teaching at Nyack College could have been used for other paid activities or research.

Sunk Costs: Sunk costs are expenditures that have already been incurred and cannot be recovered. In the case of Nyack College, sunk costs may include initial investments in infrastructure, equipment, or previous marketing campaigns. These costs should be ignored when evaluating the profitability of ongoing operations.

Revenue Analysis

Tuition and Fees: Nyack College generates revenue through tuition fees paid by students. These fees are a significant source of income for the institution.

Grants and Donations: Nyack College may also receive grants and donations from external sources, which contribute to its revenue stream.

Determining the Breakeven Point

The breakeven point for Nyack College can be determined by identifying the point at which its total revenue equals its total costs (Alliance University, 2023). In the cohort model, the breakeven point is the number of students required to cover all the costs associated with providing education.

To calculate the breakeven point, Nyack College needs to consider the following factors:

Total Cost to Attend: Nyack College should determine the average total cost incurred by a student during their enrollment. This includes tuition fees, textbooks, housing, meals, and other miscellaneous expenses.

Cohort Size: The cohort size represents the number of students enrolled in a particular program or academic year.

By dividing the total cost by the cohort size, Nyack College can determine the cost per student. Then, by dividing the total cost per student by the tuition fees per student, the institution can identify the breakeven point.

Conclusion

In conclusion, understanding the profit function of Nyack College’s cohort model requires a comprehensive analysis of costs and revenues. By adopting an economic perspective and considering opportunity costs while ignoring sunk costs, Nyack College can determine its profitability. By calculating the breakeven point, which represents the number of students needed to cover all costs, the institution can make informed decisions about its operations and ensure its financial sustainability. By effectively managing costs and optimizing revenues, Nyack College can continue to fulfill its mission of advancing society and industry through advanced education.

References

Alliance University. (2023, May 31). Bachelor of Professional Studies in Organizational Management | Alliance University. https://allianceu.edu/school-of-business-and-leadership/bachelor-of-professional-studies-in-organizational-management/ 

Tuovila, A. (2022). Economic profit (or loss): Definition, Formula, and example. Investopedia. https://www.investopedia.com/terms/e/economicprofit.asp 

Wokutch, R. E., Steiner, J. F., Waddock, S., & Mallott, M. J. (2017). Oral Histories of the Business and Society/SIM field and the SIM Division of the Academy of Management: Origin Stories from the founders. Business & Society, 57(8), 1503–1712. https://doi.org/10.1177/0007650316680038