Breakeven analysis of Sunset Voyages

Sunset voyages Inc., is a company operated by Jacques as a summer tourist attraction on the great lakes. It operates a sailing schooner offering day cruises for individuals and groups. Over the last few years, the average number of tourists per cruise was 30. The average charge per person for the cruise, including group discounts was $100.The company operates from mid-may until mid- September. On average the ship sails 100 days (sailings) during this period.

The Sailing bird (the name of the schooner) requires a crew of 6 and is captained by the owner of the company. University students with extensive sailing experience have been willing to work on a per diem basis of $100. They are paid only if the ship is cruising. The ship provides non-alcoholic refreshments and a light lunch. These are required daily from a local delicatessen and cost on average $25 per person. The daily operating expenses, fuel and miscellaneous supplies average

$50 a cruise. The company has a variety of annual expenses (fixed costs) including: maintenance, depreciation, marketing, licenses, Etc... Totaling approximately $85,000.

Required:

1. Compute the revenue, variable expenses and the contribution margin for each cruise

2. Compute the number of cruises Sunset voyages must have each year to breakeven.

3. The owner (himself is the captain also) expects a profit of $125,000 (being total return on his capital and remuneration for being the captain). Using the concept of contribution margin and a cost-volume-profit notion, estimate how many cruises the Sunset Voyages needs to make to reach this objective? Is there a realistic expectation?

4. Prepare a contribution margin income statement for Sunset Voyages Inc. assuming 100 cruises being operated during this period.