(Cost behavior) Your social fraternity/sorority has the opportunity to have Beyonce perform for free at the school’s basketball arena on January 28, 2006, because one of the members won an Internet contest. Your school is located in Illinois; its basketball arena holds 25,000 people. The chancellor is charging your fraternity/sorority $80,000 for the facilities and $25 for each ticket sold. The fraternity/sorority asks you, their only numbers-astute mem¬ ber, to determine how much to charge for each ticket. The group wants to make a profit of $5 per ticket sold. You make the assumption that 10,000 tickets will be sold.

a. What is the total cost if 10,000 tickets are sold?

b. What price per ticket must be charged for the group to earn its desired profit margin?

C. Suppose that on January 27, 2006, a major snow storm hit Illinois, bring¬ ing in 36 inches of snow and ice. Only 5,000 tickets are sold because most students were going to buy their tickets at the door. What is the total profit or loss to the fraternity/sorority?

d. What assumptions did you make about your calculations that should have been conveyed to the fraternity/sorority?

e. Suppose instead that no storm hit Illinois and, by showtime, 20,000 con¬ cert tickets had been sold. What is the total profit or loss to the fraternity/ sorority?

LO1.