Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows:Variable costs per cruise:      Crew to serve passengers $1,200,000    Food 1,500,000    Amenity and excursion 400,000       Total variable cost per cruise $3,100,000Fixed costs per cruise:      Crew to run ship $1,500,000    Depreciation expense 120,000    Fuel 50,000       Total fixed cost per cruise $1,670,000Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise.a. Determine the operating income for a cruise.$b. Determine the variable cost per passenger for each variable cost item.Crew to serve passengers $ per passengerFood $ per passengerAmenity and excursion $ per passengerc. Determine the contribution margin per passenger.$ per passengerd1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0".Differential AnalysisExisting Plan (Alt. 1) or Early Booking Program (Alt. 2)  Existing Plan(Alternative 1)Early BookingProgram(Alternative 2)DifferentialEffects(Alternative 2)Revenues per cruise$$$Variable costs per cruise:   Crew to serve passengers$$$Food   Amenity and excursion   Advertising   Total variable costs per cruise$$$Contribution margin per cruise$$$d2. Is the new booking program financially acceptable?

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Asked Dec 1, 2019
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Atlantis Cruise Lines offers luxury, one-week cruise packages in the Greek Aegean Sea. The ship has a capacity for 1,200 people. Atlantis averages 1,000 passengers per cruise. The price per passenger is $6,000. Costs associated with a cruise are as follows:

Variable costs per cruise:    
    Crew to serve passengers   $1,200,000
    Food   1,500,000
    Amenity and excursion   400,000
       Total variable cost per cruise   $3,100,000
Fixed costs per cruise:    
    Crew to run ship   $1,500,000
    Depreciation expense   120,000
    Fuel   50,000
       Total fixed cost per cruise   $1,670,000

Atlantis proposes an early booking program to help increase the number of passengers per cruise. Under the proposed early booking program, the first 300 passengers to book a cruise will receive a $1,500 discount off the normal price for the cruise. Atlantis expects this program to increase the number of passengers from 1,000 to 1,180 per cruise. The proposed booking program will be launched with $15,000 of advertising per cruise.

a. Determine the operating income for a cruise.
$

b. Determine the variable cost per passenger for each variable cost item.

Crew to serve passengers   $ per passenger
Food   $ per passenger
Amenity and excursion   $ per passenger

c. Determine the contribution margin per passenger.
$ per passenger

d1. Prepare a differential analysis showing the differential profit per cruise between the existing plan (Alternative 1) and the proposed early booking program (Alternative 2). If an amount is zero, enter "0".

Differential Analysis
Existing Plan (Alt. 1) or Early Booking Program (Alt. 2)
 
  Existing Plan
(Alternative 1)
Early Booking
Program
(Alternative 2)
Differential
Effects
(Alternative 2)
Revenues per cruise $ $ $
Variable costs per cruise:      
Crew to serve passengers $ $ $
Food      
Amenity and excursion      
Advertising      
Total variable costs per cruise $ $ $
Contribution margin per cruise $ $ $

d2. Is the new booking program financially acceptable?

 
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Expert Answer

Step 1

a.

Calculate the  operating income from cruise for Company ACL

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Revenues $6,000,000 Expenses: $2,700,000 $1,500,000 Crew to serve passengers Food Amenity and excursion Depreciation $400,000 $120,000 $50,000 Fuel Total expense S4,770,000 Income from operations per cruise $1,230,000

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Step 2

b.

Determine the variable cost per passenger for each variable item of Company ACL

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Number of Variable Cost Activity Cost (a) Variable cost Passengers per passenger (a b) $1,200 (b) Crew to serve passengers Food $1,200,000 $1,500,000 $400,000 1000 1000 $1,500 Amenity and excursion 1000 $400 Total $3.100

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Step 3

c.

Determine the contribution m...

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Ticket price Expenses: Crew to serve passengers $6,000 $1,200 Food $1,500 Amenity and excursion Total variable cost per passenger Contribution margin per passenger $400 $3,100 $2.900

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