Question 1. Blue Sea’s relevant range is between sales of $250,00 and $360, 000. Prepare contribution margin income statements at those volume levels. Also, compute breakeven sales in dollars.
Sales revenue--------$320,000
Variable expenses---- 96,000
Contribution margin 224,000
Fixed expenses--------210,000
Operating expense-----$14,000
Question 2. West Coast Motor Freight delivers freight throughout California, Oregon, and Washington. The company has monthly fixed expense of $490,000 and a contribution margin of 70% of revenues. Compute West Coast’s monthly operating income or operating loss if revenues are $500,000 and if they are $800,000.
Question 3. The Royal Blue schooner sails in the Us Virgin Island during the winter. The average cruise has 45 tourists on board, and each person pays $75 for a day’s sail. The ship sails 80 days each year. The Royal Blue also has a crew of fifteen, each earning an average of $95 per cruise. The crew is paid only when the ship sails. The other variable expense is for refreshments, which average $14 per passenger per cruise. annual fixed expenses total $66,000.
A) Compute revenue and variable expenses for each cruise.
B) Use the income statement equation approach to compute the number of cruises the Royal Blue must make each year to break even.
C) Use the contribution margin approach to compute the number of cruises needed each year to earn $$85, 000. Is this profit goal realistic? Give your reason.
D) Prepare the royal Blue contribution margin income statement for 80 cruises for the year. Report only two categories of expenses: variable and fixed.