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 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?

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 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?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4MAD

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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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