Question

Ocean 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. Ocean ​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 $ 210 comma 000 per month. The​ company's relevant range extends to 16 comma 000 monthly passengers. Compute the number of dinner cruise tickets Ocean Cruiseline must sell to breakeven and the sales dollars needed to breakeven.

Answer 1

Solution:

a. Sales price per passenger - variable cost per passenger= CMPP

= 50-20= 30

b. contribution margin per passenger/ sales price per passenger= CMR

= 20/50= 40%

c. Total contribution margin= contribution per passenger * passengers.

= 20*14,000= 280,000

TCM - fixed expense= operating income

280,000 -210,000= 70,000