Question

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 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.

Answer 1

Break-even number of passenger= 1,000

Step-by-step explanation:

The break sales in units is the number of units of a product/clients to be sold/served in order for the total cost to be equal to total revenue. At the break-even point total contribution is exactly equal to total fixed cost. No profit or loss is made.

The break-even point = Total general fixed cost/contribution per passenger

Contribution per passenger = price - variable cost

= 2,400- (900+400)= 1,100

Break-even number of passenger = (240,000+60,000+800,000)/1100

= 1,100,000/1,100= 1,000 passengers

Break-even number of passenger= 1,000