The Parent Teacher Organization (PTO) of Brevard County High School is planning a fund-raising campaign. The PTO is considering the possibility of hiring Charlotte Hale, a world-renowned investment counselor, to address the public. Tickets would sell for $36 each. The school has agreed to let the PTO use the high school auditorium at no cost. Mrs. Hale is willing to accept one of two compensation arrangements. She will sign an agreement to receive a fixed fee of $10,400 regardless of the number of tickets sold. Alternatively, she will accept payment of $26 per ticket sold. In communities similar to that in which Brevard County is located, Mrs. Hale has drawn an audience of approximately 400 people.

Required:

1. Present a statement showing the expected net income assuming 400 people buy tickets.

2. Assume the PTO pays Mrs. Hale a fixed fee of $10,400. Determine the amount of net income that the PTO will earn if ticket sales are 10 percent higher than expected. Calculate the percentage change in net income.

3. Assume the PTO pays Mrs. Hale a fixed fee of $10,400. Determine the amount of net income that the PTO will earn if ticket sales are 10 percent lower than expected. Calculate the percentage change in net income.

4. Assume the PTO pays Mrs. Hale $26 per ticket sold. Determine the amount of net income that the PT0 will earn if ticket sales are 10 percent higher than expected. Calculate the percentage change in net income.

5. Assume the PTO pays Mrs. Hale $26 per ticket sold. Determine the amount of net income that the PTO will earn if ticket sales are 10 percent lower than expected. Calculate the percentage change in net income.

6. Which type of cost structure (fixed or variable) produces the higher growth potential in profitability for a company?

7. Which type of cost structure (fixed or variable) faces the higher risk of declining profitability for a company?