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Crystal Cruiseline offers nightly dinner cruises off the coast of Miami, San Francisco, and Seattle. Dinner cruise tickets sell for $50 per passenger. Crystal Cruiseline's
Crystal Cruiseline offers nightly dinner cruises off the coast of Miami, San Francisco, and Seattle. Dinner cruise tickets sell for $50 per passenger. Crystal Cruiseline's variable cost of providing the dinner is $20 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $210,000 per month. The company expects to sell $8,750 tickets next month which will result in a contribution margin of $262,500 and operating income of $52,500. a. Compute the operating leverage factor when Crystal Cruiseline sells 8,750 dinner cruises. b. If volume increases by 10%, by what percentage will operating income increase? c. If volume decreases by 5%, by what percentage will operating income decrease? a. Compute the operating leverage factor when Crystal Cruiseline sells 8,750 dinner cruises. (Round your answer to one decimal place.) First identify the formula, then compute the operating leverage factor. Contribution margin / Operating income = Operating leverage factor $ 262,500 $ 52,500 5.0 b. If volume increases by 10%, by what percentage will operating income increase? (Round the percentage to the nearest whole percent.) The percentage that operating income will increase is %. c. If volume decreases by 5%, by what percentage will operating income decrease? (Round the percentage to the nearest whole percent.) The percentage that operating income will decrease is %
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