Excel

Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria. Dinner cruise tickets sell for

$100

per passenger. Cruiseline's variable cost of providing the dinner is

$50

per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is

$228,000

per month. Under these conditions, the break-even point in tickets is

4,560

and the break-even point in sales dollars is

$456,000.

1.	Suppose Excel Cruiseline cuts its dinner cruise ticket price from $100 to $80 to increase the number of passengers. Compute the new break-even point in units and in sales dollars. Explain how changes in sales price generally affect the break-even point.
2.	Assume that Excel Cruiseline does not cut the price. Excel Cruiseline could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this operating change reduces the variable expense from $50 to $44 per passenger. Compute the new break-even point in units and in dollars. Explain how changes in variable costs generally affect the break-even point.

1. Suppose

Excel

Cruiseline cuts its dinner cruise ticket price from

$100

to

$80

to increase the number of passengers. Compute the new break-even point in units and in sales dollars. Explain how changes in sales price generally affect the break-even point.Begin with the break-even point in units. Enter the formula, and then compute the break-even point. (Round your final answer up to the nearest whole number. For amounts with a zero balance, make sure to enter "0" in the appropriate cell.)

(		+		)	/		=	Break-even units
(		+		)	/		=

Part 2Now compute the break-even point in sales dollars. Enter the formula, and then compute the break-even point. (Enter decimals to three places, ".XXX". Round your answer for break-even sales up to the nearest dollar. For amounts with a zero balance, make sure to enter "0" in the appropriate cell.)

(		+		)	/		=	Break-even sales
(		+		)	/		=

Part 3All else being constant, a decrease in sales price will

decrease

increase

the contribution margin per unit and contribution margin ratio. The break-even point will therefore

decrease

increase

.

Part 42. Assume that

Excel

Cruiseline does not cut the price.

Excel

Cruiseline could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this operating change reduces the variable expense from

$50

to

$44

per passenger. Compute the new break-even point in units and in dollars. Explain how changes in variable costs generally affect the break-even point.Begin with the break-even point units. Enter the formula, and then compute the break-even point. (Round your answer for break-even units up to the nearest whole number. For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.)

(		+		)	/		=	Break-even units
(		+		)	/		=

Part 5Now compute the break-even point in sales dollars. Enter the formula, and then compute the break-even point. (Enter decimals to three places, ".XXX". Round your answer for break-even sales up to the nearest dollar. For amounts with a zero balance, make sure to enter "0" in the appropriate cell.)

(		+		)	/		=	Break-even sales
(		+		)	/		=

Part 6All else being equal, a decrease in variable costs will

decrease

increase

the contribution margin per unit and the contribution margin ratio. The break-even point will therefore

decrease

increase

.