Question
There are 3 sections to this question please answer all 3 sections: Cruiseline offers nightly dinner cruises off the coast of Miami, San Francisco, and
There are 3 sections to this question please answer all 3 sections:
Cruiseline offers nightly dinner cruises off the coast of Miami, San Francisco, and Seattle. Dinner cruise tickets sell for $80 per passenger. Ocean Cruiseline's variable cost of providing the dinner is $40 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $240,000 per month. The company's relevant range extends to 18,000 monthly passengers. The breakeven sales are 6,000 tickets sold.
a. Compute the operating leverage factor when Ocean Cruiseline sells 8,000 dinner cruises.
b. If volume increases by 9%, by what percentage will operating income increase?
c. If volume decreases by 3%, by what percentage will operating income decrease?
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