Bingo is very popular in Barrie, Ontario where some churches have a tradition of fundraising with bingo. Suppose that, due to recent changes in costs, a parish in Barrie is reviewing 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.

Requirement 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, and others would be donated (no cost) by volunteers. Admission would be $4.00 per person, entitling the player to 1 bingo card. Extra bingo cards can be purchased for $1.50 each. Many players buy extra cards and therefore the average is four bingo cards played per person.

What is he maximum in total cash prizes that the church may award and still break even if 200 people attend each weekly session?

Requirement 2.

Suppose the total cash prizes are $1,100.

a.What will be the churchs operating income if 100 persons attend?

b.What will be the churchs operating income if 200 persons attend?

c.What will be the churchs operating income if 300 persons attend?

d.Briefly explain the effects of the cost behavior on income.

Requirement 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 person.

a.What will be the churches operating income if 100 persons attend?

b.What will be the churchs operating income if 200 persons attend?

c.What will be the churchs operating income if 300 persons attend?

d.Explain why the results differ from those in Requirement 2.