Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

P 2-37: Royal Holland Line Royal Holland is a cruise ship company. It currently has six ships and plans to add two more. It offers

image text in transcribed
P 2-37: Royal Holland Line Royal Holland is a cruise ship company. It currently has six ships and plans to add two more. It offers luxury passenger cruises in the Caribbean, Alaska, and the Far East. Management is currently addressing what to do with an existing ship, the S.S. Amsterdam, when she is replaced by a new ship. The S.S. Amsterdam was built 20 years ago for S100 million. For accounting purposes, she was assumed to have a 20-year life and hence is now fully depreciated. To replace the S.S. Amsterdam would cost S500 million, but her current market value is S371,250,000. The Holland Line can borrow or lend money at 10 percent Page The S.S. Amsterdam is now sailing the Caribbean and will be replaced next year by a new ship. The S.S. Amsterdam might be moved to the Mediterranean for a new seven-day Greek island tour. A seven-day cruise would depart Athens Sunday night, stop at four ports before returning to Athens Sunday moning, and prepare for a new cruise that afternoon. The S.S. Amsterdam can carry as many as 1,500 passengers. The accompanying data summarize the operating cost for this seven-day cruise. Estimated Operating Cost of Seven-Day Greek Island Cruise S.S. Amsterdam) Variable Cost 60,000 236,000 Fixed Costt $ 80,000 10,500 177,000 62,000 240,000 38,000 S607,500 Labor Food ue Port fees and services Marketing, advertising, promotion 28,000 Totals S324,000 Based on 1,200 passengers. Fixed costs per weekly cruise. Assume there are 50 weeks (and hence 50 cruises) in a year. Required Assuming the seven-day Greek island cruise can be priced at an average of S1,620, calculate the break-even number of passengers per cruise using t a. he data provi b. What major cost component is not included in management's estimates? If you were to include the omitted cost component identified in part (b), recalculate the break-even point for the S.S. Amsterdam 's Greek island cruise. c. d. Passengers purchase beverages, souvenirs, and services while on the ship. The ship makes money on the purchases. If the ship line has a margin of 50 percent on all such on-board purchases, how much would th e average passenger have to purchase for the break-even point to be 900 passengers

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

How do you add two harmonic motions having different frequencies?

Answered: 1 week ago