Homework Answers
Answer to a.
Variable cost for 2000 passengers is 2,000,000, So per passenger variable cost = Total variable cost / total passengers
= 2,000,000 / 2,000
=$1,000
Price per passenger = $2,000
Margin per passenger = Price - Variable cost = $2,000 - $1,000
=$1,000
They need to consider cost of capital @ 15% on the additional cost incurred ( $180M new purchase and $150M old sale) = 15% on 30M
= 4,500,000 for 25 trip = $180,000 per trip
Break even point = Fixed Cost / Margin per passenger
= 1,500,000+180,000 / 1,000
= 1,680 Passenger
Answer to b.
Further they need to consider opportunity cost.
Opportunity cost = 15% on 150M
= 22,500,000 for 25 trip = $700,000 per trip
Total Fixed cost = Estimate + Interest cost + opportunity cost
Break even point = $1,500,000+$180,000+$700,000 / $1,000
= 2,380 passenger
Ship maximum capacity is 2,000 so they are not able to get break even.
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