Use the information from the Fun Time Cruiseline Data Set.
1. Suppose Fun Time Cruiseline cuts its dinner cruise ticket price from $50 to $45 to increase the number of passengers. Compute the new breakeven point in units and in sales dollars. Explain how changes in sales price generally affect the breakeven point.
2. Assume that Fun Time Cruiseline does not cut the price. Fun Time Cruiseline could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this operating change reduces the variable expense from $30 to $20 per passenger. Compute the new breakeven point in units and in dollars. Explain how changes in variable costs generally affect the breakeven point.
Fun Time Cruiseline Data Set
FunTime 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 $50 per passenger. FunTime 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 $210,000 per month. The company’s relevant range extends to 20,000 monthly passengers.