Queen Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Vict
ID: 2584713 • Letter: Q
Question
Queen Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria. Dinner cruise tickets sell for $80 per passenger. Queen Cruiseline's variable cost of providing the dinner is $40 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $208,000 per month. The company's relevant range extends to 17,500 monthly passengers. The break-even units are 5,200 tickets sold. If Queen Cruiseline sells 12,500 dinner cruises, compute the margin of safety
a. in units (dinner cruise tickets)
b. in sales dollars
c. as a percentage of sales
Explanation / Answer
a calculation of margin of safety in units margin of safety in units actual sales - break even sales 12500 - 5200 7300 b calculation of margin of safety in sales dollars margin of safety in sales dollars margin of safety in units * selling price 7300 * 80 584000 c calculation of margin of safety as a percentage of sales margin of safety as a percentage of sales margin of safety in sales dollars / total sales total sales sales in units * selling price 12500 * 80 1000000 margin of safety as a percentage of sales 584000 / 1000000 58.40%