east- FunTime Cruiseline offers nightly ern coast of the United States including Charleston, Baltimore, and Alexandria, Dinner cruise tickets sell for $50 per passenger. FunTime Cruiseline's variable cost of providing the dinner is $30 per passenger, and the fixed cost of operating the vessels (depreciation salaries, docking fees, and other expenses) is $210,000 per month. The company's rel- evant range extends to 20,000 monthly passengers. Compute unit contribution margin and contribution margin ratio (Learning Objective 1) Use the information from the FunTime Cruiseline Data Set to compute the following: a. What is the contribution margin per passenger? p. What is the contribution margin ratio? = Use the unit contribution margin to project operating income if monthly sales too 17,000 passengers. 1. Use the contribution margin ratio to project operating income if monthly sales le enue totals $595,000.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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