2-36 Bingo and Leverage

A California law permits bingo games when offered by specified nonprofit institutions

including churches. Reverend Jill Bono, the pastor of a new parish in Marin County, is

investigating the desirability of conducting 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. Bingo cards would be provided by a local printer in return for free advertising there-

on. Door prizes would be donated by local merchants. The services of clerks, callers,

security force, and others would be donated by volunteers. Admission would be $3 per

person, entitling the player to one card; extra cards would be $1.50 each. Reverend

Bono also learns that many persons 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 persons attend each weekly session?

2. Suppose the total cash prizes are $900. 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 behavior on income.

3. After operating for 10 months, Reverend Bono is thinking of negotiating a different

rental arrangement but keeping the prize money unchanged at $900. Suppose the

rent is $200 weekly 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