Bingo is very popular in Winnipeg, where some churches have a tradition of fundraising with bingo. Suppose that, due to recent changes in costs, a parish in Winnipeg is reviewing the desirability of conducting its weekly bingo nights. The parish has no hall, but a local hotel would be willing to commit its hall for a lump-sum rental of $600 per night. The rent would include cleaning, setting up and taking down the tables and chairs, and so on.

1. A local printer would provide bingo cards in return for free advertising. Local merchants would donate door prizes. The services of clerks, callers, security force, and others would be donated by volunteers. Admission would be $4.00 per person, entitling the player to 1 card; extra cards would be $1.50 each. Many players buy extra cards so there would be an average of four cards played per person. What is the maximum in total cash prizes that the church may award and still break even if 200 people attend each weekly session?

2. Suppose the total cash prizes are $1,100. What will be the church’s operating income if 100 persons attend? If 200 persons attend? If 300 persons attend? Briefly explain the effects of the cost behaviour on income.

3. Suppose that after operating for 10 months, the parish is thinking of negotiating a different rental arrangement but keeping the prize money unchanged at $1,100. Suppose the rent is $200 per night plus $2 per person. Compute the operating income for attendance of 100, 200, and 300 persons, respectively. Explain why the results differ from those in requirement 2.