Use the information from the Fun Time Cruiseline Data Set. Suppose Fun Time Cruiseline decides to offer
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____________________________________Regular Cruise ______ Executive Cruise
Sales price per ticket ........................................... $50.......................................$100
Variable expense per passenger........................... $30........................................$ 40
Assuming that Fun Time Cruiseline expects to sell four regular cruises for every executive cruise, compute the weighted-average contribution margin per unit. Is it higher or lower than a simple average contribution margin? (A simple average is calculated by adding both contribution margins per passenger together and dividing by two.) Why? Is it higher or lower than the regular cruise contribution margin calculated in S7-1? Why? Will this new sales mix cause Fun Time Cruiseline's breakeven point to increase or decrease from what it was when it sold only regular cruises?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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