Great Cruiseline offers nightly dinner cruises departing from several cities on the eastern coast of the United States including Charleston , Baltimore , and Alexandria . Dinner cruise tickets sell for $ 50 per passenger . Great 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 $ 270,000 per month . Under these conditions , the breakeven point in tickets is 9,000 and the breakeven point in sales dollars is $ 450,000 . Suppose Great Cruiseline embarks on a cost reduction drive and slashes fixed expenses from $ 270,000 per month to per month to $255,000.

2. Is the breakeven point higher or lower than under the original conditions ? Explain how changes in fixed costs generally affect the breakeven point .

The breakeven point is (lower/higher) All else being equal, ( a decrease/increase) in fixed costs will decrease the breakeven point while (a decrease/increase) in fixed costs will increase the breakeven point .