Pricing - Health Cruises Case Questions

Directions: Read the Health Cruises case and submit answers to the following questions through the Turnitin link:

1. What is the minimum number of passengers Health Cruises must sign up by November 20th to break even? [show your Break Even calculations]

With an average ticket price of $1500, alongside a cost per passenger of $200, each ticket created $1,300 of the positive cash flow. With 295,000 of the initial capital having been spent by the 14th of November, the minimum number of passengers needed for Health Cruises to break even would be 227 (provided no more money is invested).

2. Should Health Cruises go ahead with the cruise since 200 people have signed up by November 14th? Why or why not?

3. The advertising agency has proposed two alternative campaigns to help fill the boat. One will cost $60,000 and the other would cost $150,000. Which would you suggest? [again, show your Break Even calculations].

4. Should Health Cruises consider cutting its prices for this trip? Why or why not? What other factors could impact the go/no-go decision in addition to the break even?

5. Starting with the next cruise, Health Cruises has been approached by the On-a-Whim Agency to act as travel agent and representative in booking the Health Cruise. On-a-Whim requires a 20% margin and Health Cruises fixed costs will remain the same due to on-going expenses and advertising.

a. How much revenue would Health Cruises receive from each customer?
[Hint - You must factor in the On-a-Whim margin.]


b. What is the new break even [show your Break Even calculations].

c. Would you recommend that Health Cruises hire On-a-Whim and why or why not?