Great

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 Great 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 Great Cruiseline does not cut the price. Great 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.

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