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please help, this is a practice answer but not sure how all is solved. Thanks for any help. Suppose Excel Cruiseline decides to offer two
please help, this is a practice answer but not sure how all is solved. Thanks for any help.
Suppose Excel Cruiseline decides to offer two types of dinner cruises: regular cruises and executive cruises. The executive cruise includes complimentary cocktails and a five-course dinner on the upper deck. Assume that fixed expenses remain at $360,000 per month and that the following ticket prices and variable expenses apply: (Click the icon to view the ticket prices and expenses.) Assuming that Excel Cruiseline expects to sell four regular cruises for every executive cruise, compute the weighted average contribution margin per unit. Is it higher or lower than a simple average contribution margin? (A simple average is calculated by adding both contribution margins per passenger together and dividing by two.) Why? Is it higher or lower than the regular cruise contribution margin of $40? Why? Will this new sales mix cause Excel Cruiseline's breakeven point to increase or decrease from what it was when it only sold regular cruises? Executive Total Regular 80 $ 160 i Data Table 40 80 Sale price per ticket Less: Variable cost per ticket Contribution margin per ticket Sales mix Contribution margin Executive Cruise $ 160 160$ 80 Regular Cruise Sale price per ticket. . . . . . . . . . . ... $ 80 Variable expense per passenger .... 40 240 80 Weighted average contribution margin per unit $ 48 A simple average contribution margin would be $ 60'. Print Done Is the weighted average contribution margin higher or lower than a simple average contribution margin? The weighted average is less than the simple average because Excel Cruiseline sells more regular cruises, which have a lower contribution margin, than executive cruises. Is the weighted average contribution margin higher or lower than the regular cruise contribution margin of $40? Why? The weighted average contribution margin is higher than the contribution margin of regular cruises because Excel Cruiseline sells some executive cruises, and they have a higher contribution margin than regular cruises. Will this new sales mix cause Excel Cruiseline's breakeven point to increase or decrease from what it was when it only sold regular cruises? Because the new sales mix creates a higher weighted average contribution margin, Excel Cruiseline will need to sell fewer cruises, in total, to breakeven than when they just sold regular cruisesStep by Step Solution
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