Gamer Streamer Inc. (GSI) is an organization that coordinates seminars to help new streamers launch their platform, giving tips and tricks to help them kick-start their streaming careers. The seminars are usually a week long, in various cities throughout Canada. The maximum amount of seminars that can happen per year is 40 seminars.

Recently, a new streaming platform has launched to compete with the mainline platforms called Eden Union (EU). Eden Union approached Gamer Streamer Inc to host 40 week-long seminars in 2022, which they will sell to their streamers to increase the quality of content on their platform.

You are an employee of Gamer Streamer Inc. and you are evaluating three options with regards on how to structure revenues from Eden Union:

• accept a flat fee for each seminar held
• receive a percentage of Eden Union's profit before tax for each of the seminars
• form a joint venture with Eden Union to share costs and profits

Estimated costs for the 2022 seminar schedule follow:

	Gamer Streamer Inc	Eden Union
Fixed costs for the year:
Salaries and benefits	$ 182,000	N/A*
Facilities	66,000	N/A*
Travel and hotel	0	$ 234,600
Other	70,000	N/A*
Total fixed costs	$ 318,000	$ 234,600
Variable cost per participant:
Supplies and materials	0	$ 47
Marketing	0	18
Other site costs	0	35

*Edens fixed costs will be incurred whether or not the seminars are presented so they are excluded because those amounts are not considered relevant then for this decision. Note that Eden Union does not include these costs when calculating the profit before tax for the seminars.

For each one-week seminar, Eden Union will pay all variable marketing, site costs, and materials costs and it plans to charge $1,200 per participant.

Required

1. Assuming that the seminars are handled as a joint venture by GSI and EU to pool costs and revenues.

a. Determine the total number of seminar participants needed to break even on the total costs for this joint venture.

b. Assume an effective income tax rate of 30% for the joint venture. To earn an after-tax income of $268,625, how many seminar participants must the joint venture enroll?

2. Assume that GSI is an independent contractor for EU, so GSI and EU do not form a joint venture.

EU offers two payment options to GSI: 1) a flat fee of $9,500 for each seminar or 2) a fee of 40% of EUs profit before taxes from the seminars.

Calculate the minimum number of participants needed for GSI to prefer the 40% fee option over the flat fee.