Use the information from the Fun Time Cruiseline Data Set. Suppose Fun Time 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. Assume that fixed expenses remain at $210,000 per month and that the following ticket prices and variable expenses apply

____________________________________Regular Cruise ______ Executive Cruise

Sales price per ticket ……………………………………. $50…………………………………$100

Variable expense per passenger……………………… $30………………………………….$ 40

Assuming that Fun Time Cruiseline expects to sell four regular cruises for every executive cruise, compute the weighted-average contribution margin per unit. Is it higher or lower than a simple average contribution margin? (A simple average is calculated by adding both contribution margins per passenger together and dividing by two.) Why? Is it higher or lower than the regular cruise contribution margin calculated in S7-1? Why? Will this new sales mix cause Fun Time Cruiseline’s breakeven point to increase or decrease from what it was when it sold only regular cruises?



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