Question

Score: 0 of 3 pts 1 5 of 15 (0 complete) HW Score: 0%, 0 of 72 pts S7-5 (similar to) Question Help O 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 $210,000 per month. Under these conditions, the breakeven point in tickets is 7,000 and the breakeven point in sales dollars is $350,000. 1. Suppose Ocean 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. Assume that Ocean Cruiseline does not cut the price. Ocean 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 Ocean 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. 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 cell.) = Breakeven units

Answer 1

1)Calculation of New Breakeven Point:

Particulars	Amount
Sales Price per unit	40
Variable Cost per unit	20
Contribution per unit	20

Total Fixed Cost = 210000

Breakeven Point= Total Fixed Cost/Contribution per unit

=210000/20

=10500 units

Breakeven Point (in sales) =10500 x 40

=420000

Due to change in sales price it inversely affects the Breakeven point.

If sales price decreases Breakeven point increases subject to quantity of units remains same.

If sales price increases Breakeven point decreases subject to quantity of units remains same.

2)Calculation of New Breakeven Point:

Particulars	Amount
Sales price per unit	50
Variable Cost per unit	10
Contribution per unit	40

Total Fixed Cost = 210000

Breakeven Point= Total Fixed Cost/Contribution per unit

=210000/40

=5250 units

Breakeven Point (in sales) =5250x 40

=262500

Due to change in variable cost it directly affects the Breakeven point.

If variable cost decreases Breakeven point decreases subject to quantity of units remains same.

If variable cost  increases Breakeven point increases subject to quantity of units remains same.