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.
B. Assume 900 passengers booked the cruise. What would be the profit or loss for the cruise?
C. Assume the cruise was booked to capacity. What would be the profit or loss for the cruise?
D. If the cruise cannot book enough passengers to break even, how might the cruise line respond?