Analyze Atlantis Cruise Lines

Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows:

Variable costs per cruise: Crew to serve passengers $1,200,000 Food 1,500,000 Amenity and excursion 400,000 Total variable cost per cruise $3,100,000Fixed costs per cruise: Crew to run ship $1,500,000 Depreciation expense 120,000 Fuel 50,000 Total fixed cost per cruise $1,670,000

Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise.

Question Content Area

a. Determine the operating income for a cruise. $fill in the blank 80ded8ff7fcef8e_1

b. Determine the variable cost per passenger for each variable cost item.

Crew to serve passengers $fill in the blank 80ded8ff7fcef8e_2 per passengerFood $fill in the blank 80ded8ff7fcef8e_3 per passengerAmenity and excursion $fill in the blank 80ded8ff7fcef8e_4 per passenger

c. Determine the contribution margin per passenger. $fill in the blank 80ded8ff7fcef8e_5 per passenger

Question Content Area

d1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0".

Existing Plan (Alternative 1)Early Booking Program (Alternative 2)Differential Effects (Alternative 2)Revenues per cruise$fill in the blank d2c962f6c061f9b_1$fill in the blank d2c962f6c061f9b_2$fill in the blank d2c962f6c061f9b_3Variable costs per cruise:blankblankblankCrew to serve passengers$fill in the blank d2c962f6c061f9b_4$fill in the blank d2c962f6c061f9b_5$fill in the blank d2c962f6c061f9b_6Foodfill in the blank d2c962f6c061f9b_7fill in the blank d2c962f6c061f9b_8fill in the blank d2c962f6c061f9b_9Amenity and excursionfill in the blank d2c962f6c061f9b_10fill in the blank d2c962f6c061f9b_11fill in the blank d2c962f6c061f9b_12Advertisingfill in the blank d2c962f6c061f9b_13fill in the blank d2c962f6c061f9b_14fill in the blank d2c962f6c061f9b_15Total variable costs per cruise$fill in the blank d2c962f6c061f9b_16$fill in the blank d2c962f6c061f9b_17$fill in the blank d2c962f6c061f9b_18Contribution margin per cruise$fill in the blank d2c962f6c061f9b_19$fill in the blank d2c962f6c061f9b_20$fill in the blank d2c962f6c061f9b_21

Question Content Area

d2. Is the new booking program financially acceptable?

YesNo