Crystal Crystal Cruise Line offers nightly dinner cruises off the coast of Miami

Question

Crystal Crystal Cruise Line offers nightly dinner cruises off the coast of Miami, San Francisco, and Seattle. Dinner cruise tickets sell for $50 per passenger. Crystal Crystal 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 $210,000 per month. The company's relevant range extends to 14,000 monthly passengers. Use this information to compute the following: If CrystalCrystal Cruiseline sells an additional 600 tickets, by what amount will its operating income increase (or operating loss decrease)?

Explanation / Answer

Sales Price per unit=50

Variable costs per unit=20

Contribution margin per unit=50-20=30

Contribution for 14000 tickets=30*14000=420000

Fixed costs=210000

Operating income=420000-210000=210000

Addiitonal 30*600=18000 increase in operating income when sells extra 600 tickets

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