Use the information from the Fun Time Cruiseline Data Set. Suppose Fun Time Cruiseline embarks on a cost reduction drive and slashes fixed expenses from $210,000 per month to $150,000 per month.
1. Compute the new breakeven point in units and in sales dollars.
2. Is the breakeven point higher or lower than in S7-3? Explain how changes in fixed costs generally affect the breakeven point.
Fun Time Cruiseline Data Set
FunTime 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. FunTime Cruiseline's variable cost of providing the dinner is $30 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 20,000 monthly passengers.