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

Luxury Cruiseline`s operating income will increase by $9,000

Step-by-step 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