Luxury 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. Luxury 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 $ 210 comma 000 per month. The company's relevant range extends to 16 comma 000 monthly passengers. If Luxury Cruiseline sells an additional 300 tickets, by what amount will its operating income increase (or operating loss decrease) ?

Question

Business

Jerry Salinas

5 March, 04:27

Luxury 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. Luxury 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 $ 210 comma 000 per month. The company's relevant range extends to 16 comma 000 monthly passengers. If Luxury Cruiseline sells an additional 300 tickets, by what amount will its operating income increase (or operating loss decrease) ?

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Turner Gonzalez · Answer 1

Luxury Cruiseline's operating income will increase by $9,000

Explanation:

Operating Income Before Additional 300 tickets

Sales ($50*16,000) 800,000

Less Variable Cost ($20*16,000) (320,000)

Contribution 480,000

Less Fixed Costs 210,000

Operating Income 270,000

Operating Income After Additional 300 tickets

Sales ($50 * (16,000+300)) 815,000

Less Variable Cost ($20 * (16,000+300)) (326,000)

Contribution 489,000

Less Fixed Costs 210,000

Operating Income 279,000

Effect of sells an additional 300 tickets

Operating Income After Additional 300 tickets 279,000

Operating Income Before Additional 300 tickets 270,000

Change in Operating Income 9,000