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 $270,000 per month. The company's relevant range extends to 15,000 monthly passengers. If Ocean Cruiseline sells an additional 400 tickets, by what amount will its operating income increase (or operating loss decrease)? First, identify the formula, then compute the operating income increase (or operating loss decrease). ] - Operating

Answer 1

Contribution margin per passenger = 50-20 = 30
Additional Tickets sold	X	Contribution margin per passenger	=	Operating income increase
400	X	30	=	12000