Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 19, Problem 1ADM
A)
To determine
Break-even Point: It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:
the break-even number of passengers for the eight-day cruise.
B)
To determine
the profit or loss for the cruise if 900 passengers booked the cruise.
D)
To determine
To explain: the response of the cruise line if the cruise cannot book enough passengers to break-even.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Break-even number of passengers for a cruise Ocean Escape Cruise Lines has a boat with a capacity of 1,200 passengers. An eight-day ocean cruise involves the following costs:
crew
$240,000
fuel
60,000
fixed opeating cost
800,000
The variable costs per passenger for the eight-day cruise include the following:
meals
$900
variable operating cost
400
The price of the cruise is $2,400 per passenger.A. Determine the break-even number of passengers for the eight-day cruise.B. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?C. Assume the cruise was booked to capacity. What would be the profit or loss for the cruise?D. If the cruise cannot book enough passengers to break even, how might the cruise line respond?
Break-even number of passengers for a cruiseOcean Escape Cruise Lines has a boat with a capacity of 1,200passengers. An eight-day ocean cruise involves the following costs:
CrewFuelFixed operating costs
$240,00060,000800,000
The variable costs per passenger for the eight-day cruise include thefollowing:
MealsVariable operating costs
$900400
The price of the cruise is $2,400 per passenger.A. Determine the break-even number of passengers for the eight- day cruise.B. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?C. Assume the cruise was booked to capacity. What would be theprofit or loss for the cruise?D. If the cruise cannot book enough passengers to break even, howmight the cruise line respond?
Ocean Escape Cruise Lines has a boat with a capacity of 1,200 passengers. An eight-day ocean cruise involves the following costs:
Crew
$240,000
Fuel
60,000
Fixed operating costs
800,000
The variable costs per passenger for the eight-day cruise include the following:
Meals
$900
Variable operating costs
400
The price of the cruise is $2,400 per passenger.
a. Determine the break-even number of passengers for the eight-day cruise.passengers
b. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?$ loss
c. Assume the cruise was booked to capacity. What would be the profit or loss for the cruise?
$ profit
d. If the cruise cannot book enough passengers to break even, how might the cruise line respond?
All the above.
Chapter 19 Solutions
Financial & Managerial Accounting
Ch. 19 - Describe how total variable costs and unit...Ch. 19 - Which of the following costs would be classified...Ch. 19 - Describe how total fixed costs and unit fixed...Ch. 19 - In applying the high-low method of cost estimation...Ch. 19 - If fixed costs increase, what would be the impact...Ch. 19 - Prob. 6DQCh. 19 - If the unit cost of direct materials is decreased,...Ch. 19 - Both Austin Company and Hill Company had the same...Ch. 19 - Prob. 9DQCh. 19 - Prob. 10DQ
Ch. 19 - High-low method The manufacturing costs of...Ch. 19 - Contribution margin Lanning Company sells 160,000...Ch. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Margin of safety Liu Company has sales of...Ch. 19 - Classify costs Following is a list of various...Ch. 19 - Identify cost graphs The following cost graphs...Ch. 19 - Prob. 19.3EXCh. 19 - Identify activity bases From the following list of...Ch. 19 - Identify fixed and variable costs Intuit Inc....Ch. 19 - Prob. 19.6EXCh. 19 - High-low method Ziegler Inc. has decided to use...Ch. 19 - High-low method for a service company Boston...Ch. 19 - Contribution margin ratio A. Young Company budgets...Ch. 19 - Contribution margin and contribution margin ratio...Ch. 19 - Prob. 19.11EXCh. 19 - Prob. 19.12EXCh. 19 - Break-even sales Currently, the unit selling price...Ch. 19 - Prob. 19.14EXCh. 19 - Prob. 19.15EXCh. 19 - Break even analysis for a service company Sprint...Ch. 19 - Prob. 19.17EXCh. 19 - Prob. 19.18EXCh. 19 - Prob. 19.19EXCh. 19 - Prob. 19.20EXCh. 19 - Prob. 19.21EXCh. 19 - Break-even sales and sales mix for a service...Ch. 19 - Margin of safety A. If Canace Company, with a...Ch. 19 - Prob. 19.24EXCh. 19 - Operating leverage Beck Inc. and Bryant Inc. have...Ch. 19 - Classify costs Seymour Clothing Co. manufactures a...Ch. 19 - Break-even sales under present and proposed...Ch. 19 - Prob. 19.3APRCh. 19 - Prob. 19.4APRCh. 19 - Prob. 19.5APRCh. 19 - Contribution margin, break even sales,...Ch. 19 - Classify costs Cromwell Furniture Company...Ch. 19 - Prob. 19.2BPRCh. 19 - Break even sales and cost-volume-profit chart For...Ch. 19 - Prob. 19.4BPRCh. 19 - Sales mix and break even sales Data related to the...Ch. 19 - Prob. 19.6BPRCh. 19 - Prob. 1ADMCh. 19 - Break-even subscribers for a video service Star...Ch. 19 - Prob. 3ADMCh. 19 - Prob. 19.1TIFCh. 19 - Prob. 19.3TIF
Knowledge Booster
Similar questions
- Analyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of 180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. c. Determine the contribution margin per passenger for discounted tickets. d. Should Pacific Airways offer the discounted ticket plan? Answer the question by computing the incremental contribution margin per flight for the plan.arrow_forwardAtlantis 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…arrow_forwardSuper 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 $80 per passenger. Super 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 14,000 monthly passengers. Use this information to compute the following: a. What is the contribution margin per passenger? b. What is the contribution margin ratio? c. Use the unit contribution margin to project operating income if monthly sales total11,000 passengers. d. Use the contribution margin ratio to project operating income if monthly sales revenue totals $515,000.arrow_forward
- Super 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. Super 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 $270,000 per month. The company's relevant range extends to 19,000 monthly passengers. Use this information to compute the following: a. What is the contribution margin per passenger? b. What is the contribution margin ratio? c. Use the unit contribution margin to project operating income if monthly sales total 16,000 passengers. d. Use the contribution margin ratio to project operating income if monthly sales revenue totals $520,000.arrow_forwardKrazy Kayaks sells its entry-level kayaks for $750 each. Its variable cost is $500 per kayak. Fixed costs are $25,000 per month for volumes up to 1100 kayaks. Above 1100 kayaks, monthly fixed costs are $60,000. What is the budgeted operating income at a level of 2500 kayaks per month? Question 5 options: $1,815,000 $565,000 $600,000 $625,000arrow_forwardSea the World Cruises sells 4,000 tickets on its deluxe yacht: Selling price per customer $4,000 Variable cost per customer $1,000 Annual fixed cost $500,000 What is the company's breakeven point in units, i.e., customers? Round to the nearest whole unit.arrow_forward
- Global Air is considerng a new flight between Atlanta and Los Angeles. The avaerage fare per seat for the flight is $760.The cost associated with the flight are as follows: Fixed cost for the flight Crew Salaries $5,000 Operating Costs 50,000 Aircraft Depreciation 25,000 Total: $80,000 Variable cost per passenger Passenger check-in $20 Operating Costs: 100 Total: $120 The airline estimates that the flight will sell 175 seats. a. determine the break-even number of passengers per flight b. Based on answer in (a), should the airline add this flight to it's schedule? c. How much profit should each flight produce? d. What additionl issues might the airline consider in this decision?arrow_forwardDance Unlimited plans to sell 10,000 ballet shoes at $50 each in the coming year. The per-unit variable cost is $30, and the total fixed cost equals $65,000. Required: A. Calculate the break-even number of ballet shoes.fill in the blank 1 ballet shoes B. Calculate the break-even sales dollars.$fill in the blank 2arrow_forwardLifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows:Airfare $1,600 Hotel accommodations 3,100 Meals 600 Ground transportation 300 Park tickets and other costs 700 Total $6,300 Annual fixed costs total $570,000. Q. Calculate the number of package tours that must be sold to break even.arrow_forward
- Calculating breakeven point for two products Scotty’s Scooters plans to sell a standard scooter for $55 and a chrome scooter for $70. Scotty’s purchases the standard scooter for $30 and the chrome scooter for $40. Scotty’s expects to sell one standard scooter for every three chrome scooters. Scotty’s monthly fixed costs are $23,000. Requirements How many of each type of scooter must Scotty’s Scooters sell each month to break even? How many of each type of scooter must Scotty’s Scooters sell each month to earn $25,300? 3 Suppose Scotty’s expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.)arrow_forwardTravel Agency specializes in flights between Toronto and Peru. It books passengers on Toronto Air. North’s fixed costs are $35,000 per month. Toronto Air charges passengers $1,700 per round-trip ticket.Calculate the number of tickets North Travel must sell each month to (a) break even and (b) make a target operating income of $17,000 per month in each of the following independent cases.Required:1. North’s variable costs are $33 per ticket. Toronto Air pays Sunset 5% commission on ticket price.2. North’s variable costs are $37 per ticket. Toronto Air pays Sunset 7% commission on ticket price.3. North’s variable costs are $53 per ticket. Toronto Air pays $68 fixed commission per ticket to North. Comment on the results.4. North’s variable costs are $40 per ticket. It receives $60 commission per ticket from Toronto Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results. (please give the solution of part 4 and part 5 of this question as the previous are…arrow_forwardSunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket. Calculate the number of tickets Sunset must sell each month to (a) break even and (b) make a target operating income of $10,000 per month in each of the following independent cases. Q1. Sunset’s variable costs are $43 per ticket. Hamilton Air pays Sunset 6% commission on ticket price. Q2. Sunset’s variable costs are $40 per ticket. Hamilton Air pays Sunset 6% commission on ticket price. Q3. Sunset’s variable costs are $40 per ticket. Hamilton Air pays $60 fixed commission per ticket to Sunset. Comment on the results. Q4. Sunset’s variable costs are $40 per ticket. It receives $60 commission per ticket from Hamilton Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,