Effects of fixed and variable cost behavior on the risk and rewards of business opportunities Beach Club and Mountain Club are competing health and recreation clubs in Chicago. They both offer tennis training clinics to adults. Beach pays its coaches $9,000 per season. Mountain pays its coaches $300 per student enrolled in the clinic per season. Both clubs charge a tuition fee of $432 per season. 

Required

a. Prepare income statements for Beach and Mountain, assuming that 30 students per season attend each clinic.

b. The ambitious new director of Beach Club tries to increase his market share by reducing the club’s tuition per student to $250 per clinic. Prepare an income statement for Beach, assuming that the club attracts all of Mountain’s customers and therefore is able to enroll 60 students in its clinics.

c. Independent of Requirement b, Mountain Club tries to lure Beach’s students by lowering its price to $210 per student. Prepare an income statement for Mountain, assuming that the club succeeds in enrolling 60 students in its clinics.

d. Explain why the strategy described in Requirement b produced a profit while the same strategy described in Requirement c produced a loss. 

e. Prepare an income statement for Beach Club and Mountain Club, assuming that 18 students attend a clinic at the original $432 tuition price.

f. It is always better to have fixed rather than variable cost. Explain why this statement is false.

g. It is always better to have variable rather than fixed cost. Explain why this statement is false.