Question

7 of 15 (0 complete) HW Score: 0%, 0 of 72 pts Score: 0 of 3 pts S7-9 (similar to) Question Help Great 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 $60 per passenger. Great Cruiseline's variable cost of providing the dinner is $30 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 20,000 monthly passengers. The breakeven units are 9,000 tickets sold. If Great Cruiseline sells 10,000 dinner cruises, compute the margin of safety a. in units (dinner cruise tickets). b. in sales dollars. c. as a percentage of sales. a. If Great Cruiseline sells 10,000 dinner cruises, compute the margin of safety in units (dinner cruise tickets). Begin by determining the formula, then compute the margin of safety in units (dinner cruise tickets). = Margin of safety in units

Answer 1

Solution:

Margin of safety in units = Current sales units - Break even sales units = 10000 - 9000 = 1000 dinner cruise tickets

Margin of safety in sales dollar = Current sales - Break even sales = (10000*$60) - (9000*$60) = $60,000

Margin of safety in percentage of sales = (Current sales - Break even sales) / Current sales

= ($600,000 - $540,000) / $600,000 = 10%