Former NFL Coach Joe Gibbs Is Highly Sought After as a Guest

Essay

Former NFL coach Joe Gibbs is highly sought after as a guest speaker.His fee can run as high as $150,000 for a single two-hour appearance.Recently,he was asked to speak at a seminar offered by the National Sports in Education Foundation (NSEF).Due to the charitable nature of the organization,Mr.Gibbs offered to speak for $100,000.NSEF planned to invite 350 guests who would each make a $500 contribution to the organization.The Foundation's executive director was concerned about committing so much of the organization's cash to this one event.So instead of the $100,000 fee she countered with an offer to pay Mr.Gibbs 50% of the revenue received from the seminar and no other payments.
Required:
(a)Classify the two offers in terms of cost behavior (fixed vs.variable).
Scenario A,NSEF pays Gibbs a $100,000 fee:
Scenario B,NSEF pays Gibbs 50% of revenue:
(b)Compute the budgeted income (assuming there are no other expenses)under each of the following scenarios:
1)NSEF agrees to pay the $100,000 fee,and 350 guests actually attend the seminar;and
2)NSEF pays Mr.Gibbs 50% of revenue,and 350 guests attend the seminar.
(c)For each scenario ($100,000 fee vs.50% of revenue),compute the percentage increase in profit that would result if the Foundation is able to increase attendance by 20 percent over the original plan (to a total of 420).(Round the percentages to the nearest whole numbers. )
(d)For each scenario,compute NSEF's cost per contributor if 350 attend and if 420 contributors attend.(Round the cost per contributor to two decimal points. )
(e)Summarize the impact on risk and profits of shifting the cost s