Question

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. Great ​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 12,000 monthly passengers.
If FunTime Cruiseline has a target operating income of $30,000 per month, how many dinner cruise tickets must the company sell? First, identify the formula, then compute the target sales in units.

Answer 1

Answer:

6,750 dinner cruise tickets

Explanation:

The computation of the break even point in units is shown below:

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)  

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit  

So, the contribution margin per unit is

= $80 - $40

= $40

And, the fixed expenses is $240,000

And, the target operating income is $30,000

So, the target sales in units is

= ($240,000 + $30,000) ÷ ($40)

= 6,750 dinner cruise tickets