To raise funds for its community activities, a Lions Club chapter is negotiating with International Carnivals to bring its midway rides and games to town for a three-day opening. The event will be held on part of the parking lot of a local shopping centre, which is to receive 10% of the gross revenue. The Lions Club members will sell the ride and game tickets at the site. International Carnivals requires either $15,000 plus 30% of revenue or $10,000 plus 50% of revenue. The experience of other towns that have held the event is that customers spend an average of $10 per person on rides and games.
a. What is the break-even attendance under each basis for remunerating International Carnivals?
b. For each alternative, what will be the club’s profit or loss if the attendance is:
(i) 3000?
(ii) 2200?
c. How would you briefly explain the advantages and disadvantages of the two alternatives to a club member?