Question

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)?

Answer 1

Answer:

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