Cost Behavior Analysis

Shelley,
Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make
plans for next year’s rodeo. Shelley believes by negotiating with local feed
stores, inn- keepers, and other business owners, costs can be cut dramatically.
Jonathan agrees. After carefully analyzing costs, Jonathan has estimated the
fixed expenses can be pared to approximately $51,000. In addition, Jonathan
estimates variable costs are 4% of total gross receipts. After talking with
business owners who attended the rodeo, Adrian is confident the funds solicited
from sponsors will increase. Adrian is comfortable in budgeting revenue from
sponsors at $25,600. The local youth group is unwilling to provide concessions
to the audience unless they receive all of the profits. Not having the
personnel to staff the concession booth, members of the Circular Club
reluctantly agree to let the youth group have 100% of the profits from the
concessions. In addition, members of the rodeo committee, recognizing the net
income from programs was only $100, decide not to sell rodeo programs next year