eBook Question Content Area Analyze Atlantis Cruise Lines Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows: Line Item Description Amount Variable costs per cruise: Crew to serve passengers $1,200,000 Food 1,500,000 Amenity and excursion 400,000 Total variable cost per cruise $3,100,000 Fixed costs per cruise: Crew to run ship $1,500,000 Depreciation expense 120,000 Fuel 50,000 Total fixed cost per cruise $1,670,000 Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise. Question Content Area a. Determine the operating income for a cruise. fill in the blank 1 of 1$ b. Determine the variable cost per passenger for each variable cost item. Line Item Description Amount Crew to serve passengers fill in the blank 1 of 3$ per passenger Food fill in the blank 2 of 3$ per passenger Amenity and excursion fill in the blank 3 of 3$ per passenger c. Determine the contribution margin per passenger. fill in the blank 1 of 1$ per passenger Feedback Area Feedback a. Consider total revenues and both variable and fixed costs to determine operating income. b. Divide the variable costs by the number of passengers. c. Use the ticket price and the variable costs to determine the contribution margin per passenger. Question Content Area d1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0". Differential AnalysisExisting Plan (Alt. 1) or Early Booking Program (Alt. 2) Line Item Description Existing Plan (Alternative 1) Early Booking Program (Alternative 2) Differential Effects (Alternative 2) Revenues per cruise $Revenues per cruise $Revenues per cruise $Revenues per cruise Variable costs per cruise: blank blank blank Crew to serve passengers $Crew to serve passengers $Crew to serve passengers $Crew to serve passengers Food Food Food Food Amenity and excursion Amenity and excursion Amenity and excursion Amenity and excursion Advertising Advertising Advertising Advertising Total variable costs per cruise $Total variable costs per cruise $Total variable costs per cruise $Total variable costs per cruise Contribution margin per cruise $Contribution margin per cruise $Contribution margin per cruise $Contribution margin per cruise

eBook Question Content Area Analyze Atlantis Cruise Lines Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows: Line Item Description Amount Variable costs per cruise: Crew to serve passengers $1,200,000 Food 1,500,000 Amenity and excursion 400,000 Total variable cost per cruise $3,100,000 Fixed costs per cruise: Crew to run ship $1,500,000 Depreciation expense 120,000 Fuel 50,000 Total fixed cost per cruise $1,670,000 Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise. Question Content Area a. Determine the operating income for a cruise. fill in the blank 1 of 1$ b. Determine the variable cost per passenger for each variable cost item. Line Item Description Amount Crew to serve passengers fill in the blank 1 of 3$ per passenger Food fill in the blank 2 of 3$ per passenger Amenity and excursion fill in the blank 3 of 3$ per passenger c. Determine the contribution margin per passenger. fill in the blank 1 of 1$ per passenger Feedback Area Feedback a. Consider total revenues and both variable and fixed costs to determine operating income. b. Divide the variable costs by the number of passengers. c. Use the ticket price and the variable costs to determine the contribution margin per passenger. Question Content Area d1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0". Differential AnalysisExisting Plan (Alt. 1) or Early Booking Program (Alt. 2) Line Item Description Existing Plan (Alternative 1) Early Booking Program (Alternative 2) Differential Effects (Alternative 2) Revenues per cruise $Revenues per cruise $Revenues per cruise $Revenues per cruise Variable costs per cruise: blank blank blank Crew to serve passengers $Crew to serve passengers $Crew to serve passengers $Crew to serve passengers Food Food Food Food Amenity and excursion Amenity and excursion Amenity and excursion Amenity and excursion Advertising Advertising Advertising Advertising Total variable costs per cruise $Total variable costs per cruise $Total variable costs per cruise $Total variable costs per cruise Contribution margin per cruise $Contribution margin per cruise $Contribution margin per cruise $Contribution margin per cruise

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter24: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3ADM

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Question Content Area

Analyze Atlantis Cruise Lines

Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows:

Line Item Description	Amount
Variable costs per cruise:
Crew to serve passengers	$1,200,000
Food	1,500,000
Amenity and excursion	400,000
Total variable cost per cruise	$3,100,000
Fixed costs per cruise:
Crew to run ship	$1,500,000
Depreciation expense	120,000
Fuel	50,000
Total fixed cost per cruise	$1,670,000

Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise.

Question Content Area

a. Determine the operating income for a cruise.
fill in the blank 1 of 1$

b. Determine the variable cost per passenger for each variable cost item.

Line Item Description	Amount
Crew to serve passengers	fill in the blank 1 of 3$ per passenger
Food	fill in the blank 2 of 3$ per passenger
Amenity and excursion	fill in the blank 3 of 3$ per passenger

c. Determine the contribution margin per passenger.
fill in the blank 1 of 1$ per passenger

Feedback Area

Feedback

a. Consider total revenues and both variable and fixed costs to determine operating income.

b. Divide the variable costs by the number of passengers.

c. Use the ticket price and the variable costs to determine the contribution margin per passenger.

Question Content Area

d1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0".

Differential AnalysisExisting Plan (Alt. 1) or Early Booking Program (Alt. 2)

Line Item Description	Existing Plan (Alternative 1)	Early Booking Program (Alternative 2)	Differential Effects (Alternative 2)
Revenues per cruise	$Revenues per cruise	$Revenues per cruise	$Revenues per cruise
Variable costs per cruise:	blank	blank	blank
Crew to serve passengers	$Crew to serve passengers	$Crew to serve passengers	$Crew to serve passengers
Food	Food	Food	Food
Amenity and excursion	Amenity and excursion	Amenity and excursion	Amenity and excursion
Advertising	Advertising	Advertising	Advertising
Total variable costs per cruise	$Total variable costs per cruise	$Total variable costs per cruise	$Total variable costs per cruise
Contribution margin per cruise	$Contribution margin per cruise	$Contribution margin per cruise	$Contribution margin per cruise

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