Challenging economic conditions in several countries have pushed freight ship companies to look for additional sources of
Question:
Challenging economic conditions in several countries have pushed freight ship companies to look for additional sources of revenue in addition to the revenue generated by hauling freight across the ocean. In recent years, one additional source of revenue for these freight companies has been to take on cruise passengers in addition to regular cargo.
Generally, there are just 2 – 12 passengers on a cargo ship. Demand for cargo ship cruises is high; travelers need to book months in advance.
Typically, passengers taking a cruise on a cargo (or container) ship will get an air-conditioned room with a private bathroom for about $115 per day. Meals are included; passengers will share three meals a day with the crew. The rooms are cleaned once a week by the ship’s steward. Passengers have to wash their own clothes. Entertainment options include walking or running on deck, playing ping pong or darts, watching or listening to CDs/DVDs, and swimming in the on-ship pool if available on that particular ship. Passengers can disembark at various ports for sightseeing. Typically a ship makes a 12 – 24 hour stop at each port on its itinerary for the loading and unloading of freight.
International regulations dictate that ships carrying more than twelve passengers have an onboard physician and a small hospital or treatment center. (Crew members, of which there are usually 15 – 25 per freighter, are not considered passengers.)
Required:
In a response of at least 350-400 words, choose two of the following questions and post your response:
1. What costs might be variable with respect to passengers carried on a cargo ship?
2. What costs might be fixed with respect to passengers carried on a cargo ship?
3. What costs and other information would be relevant when the cargo ship company makes its pricing decisions about how much to charge per passenger?
4. Should the ship depreciation costs be allocated to the cost of a passenger cruise when pricing the passenger cruise? Explain.
5. Several news sources state that passengers are “ten times more profitable” than regular freight. Why wouldn’t a freight company decide to take on more passengers and less cargo? How would costs change if more passengers were carried?
Expert Answer:
I chose questions 3 and 4 Question 3 A company considers many factors in its pricing decision because all those factors have their own significance be... View the full answer
