Evaluate unit contribution margin and contribution margin ratio
****Use the subsequent data for problems 1,2,3,4,9, &10 ****
Luxury Cruiseline offers nightly dinner cruises off coast of Miami, San Francisco, and Seattle. Dinner Cruise tickets sell for $120 per passenger. Luxury Cruise line's variable cost of providing dinner is $48 per passenger, and fixed cost of operating vessels (depreciation, docking fees, salaries, other expenses) is $270,000 per month. The company's relevant range extends to 15,000 monthly passengers.
1. a - Evaluate what is contribution margin per passenger?
b - Evaluate what is the contribution margin ratio?
c - Use unit contribution margin to project operating income if monthly sales total 10,000 passengers.
d - Use contribution margin ratio to project operating income if monthly sales revenue totals $650,000.
2. Project change in income
3. Determine Breakeven
Use the information from Luxury Cruiseline Data Set to evaluate the number of dinner cruise tickets it must sell to break even and sales dollars needed to break even.
4. Determine target profit volume
Use the information from Luxury Cruiseline Data Set. If Luxury Cruiseline has a target operating income of $97,200 per month, Find how many dinner cruise tickets must the company sell?
5. Evaluate weighted-average contribution margin.
Use the information from the Luxury Cruiseline Data Set. Assume Luxury Cruiseline decides to offer two types of dinner cruises: regular cruises and executive cruises. The executive cruise includes complimentary cocktails and a five-course dinner on the upper deck. Suppose that fixed expenses remain at $270,000 per month and that the subsequent ticket prices and variable expenses apply:
Regular Cruise Executive Cruise
Sales price per ticket ................................................ $120 $240
Variable expense per passenger ............................. $48 $180
Suppose that Luxury Cruiseline expects to sell four regular cruises for each executive cruise, evaluate the weighted-average contribution margin per unit. Is it higher or lower than a simple average contribution margin and why? Is it higher or lower than the regular cruise contribution margin evaluated Problem #1? Why? Will this new sales mix cause Luxury Cruiseline's breakeven point to decrease or increase from what it was when it sold only regular cruises?
6. Continuation of #9 Breakeven
Refer to your answer to # 9.
A) Evaluate the total number of dinner cruises that Luxury Cruiseline must sell to break even.
B) Determine the number of regular cruises and executive cruises company must sell to breakeven.