Changes in fixed costs (Learning Objective 3)}

Use the information from the Bay Cruiseline Data Set. Suppose Bay Cruiseline embarks on a cost-reduction drive and slashes fixed expenses from \(\$ 275,000\) per month to \(\$ 200,000\) per month.

1. Compute the new breakeven point in units and in sales dollars.

2. Is the breakeven point higher or lower than in S7-3 ? Explain how changes in fixed costs generally affect the breakeven point.