Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Question
Chapter 20, Problem 2MAD
A)
To determine
Calculate the break-even number of passengers for the eight-day cruise.
B)
To determine
Calculate the profit or loss for the cruise if 900 passengers booked the cruise.
C)
To determine
Calculate the profit or loss for the cruise if the cruise was booked to capacity.
D)
To determine
Explain the response of the cruise line if the cruise cannot book enough passengers to break-even.
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Ocean Escape Cruise Lines has a boat with a capacity of 1,200 passengers. An eight-day ocean cruise involves the following costs:
Crew
$240,000
Fuel
60,000
Fixed operating costs
800,000
The variable costs per passenger for the eight-day cruise include the following:
Meals
$900
Variable operating costs
400
The price of the cruise is $2,400 per passenger.
a. Determine the break-even number of passengers for the eight-day cruise.passengers
b. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?$ loss
c. Assume the cruise was booked to capacity. What would be the profit or loss for the cruise?
$ profit
d. If the cruise cannot book enough passengers to break even, how might the cruise line respond?
All the above.
Break-even number of passengers for a cruise Ocean Escape Cruise Lines has a boat with a capacity of 1,200 passengers. An eight-day ocean cruise involves the following costs:
crew
$240,000
fuel
60,000
fixed opeating cost
800,000
The variable costs per passenger for the eight-day cruise include the following:
meals
$900
variable operating cost
400
The price of the cruise is $2,400 per passenger.A. Determine the break-even number of passengers for the eight-day cruise.B. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?C. Assume the cruise was booked to capacity. What would be the profit or loss for the cruise?D. If the cruise cannot book enough passengers to break even, how might the cruise line respond?
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:
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…
Chapter 20 Solutions
Financial And Managerial Accounting
Ch. 20 - Describe how total variable costs and unit...Ch. 20 - Which of the following costs would be classified...Ch. 20 - Describe how total fixed costs and unit fixed...Ch. 20 - In applying the high-low method of cost estimation...Ch. 20 - If fixed costs increase, what would be the impact...Ch. 20 - Prob. 6DQCh. 20 - Prob. 7DQCh. 20 - Both Austin Company and Hill Company had the same...Ch. 20 - Prob. 9DQCh. 20 - What does operating leverage measure, and how is...
Ch. 20 - High-low method The manufacturing costs of...Ch. 20 - Contribution margin Waite Company sells 250,000...Ch. 20 - Prob. 3BECh. 20 - Prob. 4BECh. 20 - Sales mix and break-even analysis Conley Company...Ch. 20 - Prob. 6BECh. 20 - Margin of safety Jorgensen Company has sales of...Ch. 20 - Classify Costs Following is a list of various...Ch. 20 - Identify cost graphs The following cost graphs...Ch. 20 - Identify activity bases For a major university,...Ch. 20 - Identify activity bases From the following list of...Ch. 20 - Identify fixed and variable costs Intuit Inc....Ch. 20 - Relevant range and fixed and variable costs Child...Ch. 20 - High-low method Ziegler Inc. has decided to use...Ch. 20 - High-low method for a service company Continental...Ch. 20 - Contribution margin ratio Young Company budgets...Ch. 20 - Contribution margin and contribution margin ratio...Ch. 20 - Break-even sales and sales to realize operating...Ch. 20 - Prob. 12ECh. 20 - Prob. 13ECh. 20 - Prob. 14ECh. 20 - Break-even analysis Media outlets such as ESPN and...Ch. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Prob. 18ECh. 20 - Prob. 19ECh. 20 - Prob. 20ECh. 20 - Prob. 21ECh. 20 - Break-even sales and sales mix for a service...Ch. 20 - Margin of safety A. If Canace Company, with a...Ch. 20 - Prob. 24ECh. 20 - Operating leverage Beck Inc. and Bryant Inc. have...Ch. 20 - Classify costs Seymour Clothing Co. manufactures a...Ch. 20 - Prob. 2PACh. 20 - Prob. 3PACh. 20 - Prob. 4PACh. 20 - Prob. 5PACh. 20 - Contribution margin, break-even sales,...Ch. 20 - Classify costs Cromwell Furniture Company...Ch. 20 - Break-even sales under present and proposed...Ch. 20 - Prob. 3PBCh. 20 - Prob. 4PBCh. 20 - Prob. 5PBCh. 20 - Contribution margin, break-even sales,...Ch. 20 - Prob. 1MADCh. 20 - Prob. 2MADCh. 20 - Prob. 3MADCh. 20 - Break-even number of guests for a theme park...Ch. 20 - Prob. 1TIFCh. 20 - Communication Sun Airlines is a commercial airline...Ch. 20 - Profitability strategies Somerset Inc. has...Ch. 20 - Prob. 5TIFCh. 20 - Analysis of costs for a shipping department Sales...Ch. 20 - Taylor Corporation is analyzing the cost behavior...Ch. 20 - Kimber Company has the following unit costs for...Ch. 20 - Bolger and Co. manufactures large gaskets for the...Ch. 20 - Eagle Brand Inc. produces two products as follows:...
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Similar questions
- Break-even number of passengers for a cruiseOcean Escape Cruise Lines has a boat with a capacity of 1,200passengers. An eight-day ocean cruise involves the following costs: CrewFuelFixed operating costs $240,00060,000800,000 The variable costs per passenger for the eight-day cruise include thefollowing: MealsVariable operating costs $900400 The price of the cruise is $2,400 per passenger.A. Determine the break-even number of passengers for the eight- day cruise.B. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?C. Assume the cruise was booked to capacity. What would be theprofit or loss for the cruise?D. If the cruise cannot book enough passengers to break even, howmight the cruise line respond?arrow_forwardamounts 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.)arrow_forwardAnalyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of 180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. c. Determine the contribution margin per passenger for discounted tickets. d. Should Pacific Airways offer the discounted ticket plan? Answer the question by computing the incremental contribution margin per flight for the plan.arrow_forward
- Fir Luxury Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria. Dinner cruise tickets sell for $60 per passenger. Luxury Cruiseline's variable cost of providing the dinner is $15 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $180,000 per month. The company's relevant range extends to 20,000 monthly passengers. Use this information to compute the following: a. What is the contribution margin per passenger? b. b. What is the contribution margin ratio? c. Use the unit contribution margin to project operating income if monthly sales total 17,000 passengers. Fir d. Use the contribution margin ratio to project operating income if monthly sales revenue totals $620,000.arrow_forwardJolly Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Ottawa Air. Jolly's fixed costs are $28,500 per month. Ottawa Air charges passengers $1,100 per round-trip ticket. Read the requirement. Begin by selecting the formula to calculate the breakeven points. Requirement Breakeven number of units Fixed costs Contribution margin per unit = Calculate the number of tickets Jolly must sell each month to (a) break even and (b) make a target operating income of $13,000 per month in each of the following independent cases. (Round up to the nearest whole number. For example, 10.2 should be rounded up to 11.) Next, select the formula to calculate the number of tickets needed to meet the target operating income. Quantity of units 1. Jolly's variable costs are $36 per ticket. Ottawa Air pays Jolly 6% commission on ticket price. 2. Jolly's variable costs are $28 per ticket. Ottawa Air pays Jolly 6% commission on ticket price. 3. Jolly's variable costs are $28…arrow_forwardDeveloping an Equation from Average Costs Paradise Pub is a high-end dog hotel located in New York. Assume that in March, when dog-days occupancy was at an annual low of 500 days, the average cost per dog-day was $26. In July, when dog-days were at a capacity level of 4,500, the average cost per dog-day was $10. (a) Develop an equation for monthly operating costs. (Let X = dog-days per month) Total cost = $ -$ *X (b) Determine the average cost per dog-day at an annual volume of 28,000 dog-days. (Round to the nearest cent.) $arrow_forward
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