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Royal Hellenic Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria. Dinner cruise tickets sell for $60 per passenger. ‘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. The company’s relevant range extends to 15,000 monthly passengers.
Draw a graph of ‘s CVP relationships. Include the sales revenue line, the fixed expense line, the total expense line, and the break-even point. Determine the income area and the loss area.Royal Hellenic Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria. Dinner cruise tickets sell for $60 per passenger. 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 break-even point in tickets is 5,250 and the break-even point in sales dollars is $315,000.
1.Suppose Royal Hellenic Cruiseline cuts its dinner cruise ticket price from $60 to $40 to increase the number of passengers. Compute the new break-even point in units and in sales dollars. Explain how changes in sales price generally affect the break-even point.
Assume that Royal Hellenic Cruiseline does not cut the price. Royal Hellenic 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 break-even point in units and in dollars. Explain how changes in variable costs generally affect the break-even point.
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