Live It Cruiseline offers nightly dinner cruises departing from several cities on the eastern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $50 per passenger. Live It Cruiseline's variable cost of providing the dinner is $20 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $270,000 per month. Under these conditions, the breakeven point in tickets is 9,000 and the breakeven point in sales dollars is $450,000. 1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from $50 to $40 to increase the number of passengers. Compute the new breakeven point in units and in sales dollars. Explain how changes in sales price generally affect the breakeven point. 2. Assume that Live It Cruiseline does not cut the price. Live It Cruiseline could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this operating change reduces the variable expense from $20 to $10 per passenger. Compute the new breakeven point in units and in dollars. Explain how changes in variable costs generally affect the breakeven point. 1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from $50 to $40 to increase the number of passengers. Compute the new breakeven point in units and in sales dollars. Explain how changes in sales price generally affect the breakeven point.
Live It Cruiseline offers nightly dinner cruises departing from several cities on the eastern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $50 per passenger. Live It Cruiseline's variable cost of providing the dinner is $20 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $270,000 per month. Under these conditions, the breakeven point in tickets is 9,000 and the breakeven point in sales dollars is $450,000. 1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from $50 to $40 to increase the number of passengers. Compute the new breakeven point in units and in sales dollars. Explain how changes in sales price generally affect the breakeven point. 2. Assume that Live It Cruiseline does not cut the price. Live It Cruiseline could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this operating change reduces the variable expense from $20 to $10 per passenger. Compute the new breakeven point in units and in dollars. Explain how changes in variable costs generally affect the breakeven point. 1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from $50 to $40 to increase the number of passengers. Compute the new breakeven point in units and in sales dollars. Explain how changes in sales price generally affect the breakeven point.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:amounts with a $0 balance, make sure to enter " 0 " in the
appropriate input field.) Now compute the breakeven point
in sales dollars. Enter the formula, then compute the
breakeven sales. (Enter the contribution margin ratio as a
whole percent. For amounts with a $0 balance, make sure to
enter " 0 " in the appropriate input field.)
Transcribed Image Text:Live It Cruiseline offers nightly dinner cruises departing from several cities on the
eastern coast of the United States including Charleston, Baltimore, and
Alexandria. Dinner cruise tickets sell for $50 per passenger. Live It Cruiseline's
variable cost of providing the dinner is $20 per passenger, and the fixed cost of
operating the vessels (depreciation, salaries, docking fees, and other expenses)
is $270,000 per month. Under these conditions, the breakeven point in tickets is
9,000 and the breakeven point in sales dollars is $450,000.
1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from $50 to $40 to increase the number of passengers. Compute the new breakeven point in units and
in sales dollars. Explain how changes in sales price generally affect the breakeven point.
0
Begin with the breakeven point in units. Enter the formula, then compute the breakeven point. (Round your final answers up to the nearest whole number. For
amounts with a $0 balance, make sure to enter "0" in the appropriate input field.)
Operating income
Fixed expenses
270000
+
270000
+ $
+
($
Now compute the breakeven point in sales dollars. Enter the formula, then compute the breakeven sales. (Enter the contribution margin ratio as a whole percent. For
amounts with a $0 balance, make sure to enter "0" in the appropriate input field.)
Fixed expenses
Operating income
+
▼
0
CD
1. Suppose Live It Cruiseline cuts its dinner cruise ticket price from
$50 to $40 to increase the number of passengers. Compute the new
breakeven point in units and in sales dollars. Explain how changes
in sales price generally affect the breakeven point.
2. Assume that Live It Cruiseline does not cut the price. Live It
Cruiseline could reduce its variable costs by no longer serving an
appetizer before dinner. Suppose this operating change reduces the
variable expense from $20 to $10 per passenger. Compute the new
breakeven point in units and in dollars. Explain how changes in
variable costs generally affect the breakeven point.
) +
) +
+ Contribution margin per unit = Breakeven units
▼
13,500
$
20
Contribution margin ratio
40 %
=
= Breakeven sales
=
675000
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