Name: Gururaj Hebbalaguppe Nagendra

Student No: 041126946

Course: MGT1217 - Financial and Management Accounting
Foundations

Excel Working Sheet

Question 1: Prepare a CVP Graph

Royal Hellenic Cruise line offers nightly dinner cruises off the coast of Nanaimo and
Victoria. Dinner cruise tickets sell for $60 per passenger. 's variable cost of providing the
dinner is $20 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 15,000 monthly passengers.

Draw a graph of 's CVP relationships. Include the sales revenue line, the fixed expense line,
the total expense line, and the break-even point. Determine the income area and the loss area.

CVP Graph
$850,000
$650,000
$450,000 $315,000
$250,000
$50,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
0S 450 900 135 180 225 270 315 360 405 450 495 540 585 630 675 720 765 810 855 900
a 00 00 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000
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210
F 210 210 210 Sales
210 Ravenue
210 210 line
210 210 Fixed
210 Expense
210 210 210 Expense
210 Line 210
210 210 210 210 210 210
000
i 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000
x
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210
E 225 240 255 270 285 300 $31 330 345 360 375 390 405 420 435 450 465 480 495 510
000
x 000 000 000 000 000 000 5,00 000 000 000 000 000 000 000 000 000 000 000 000 000
p 0
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Question 2: Changes in sales prices and variable costs

Royal Hellenic Cruiseline offers nightly dinner cruises off the coast of Nanaimo and Victoria.
Dinner cruise tickets sell for $60 per passenger. Cruiseline's variable cost of providing the
dinner is $20 per passenger, and the fixed cost of operating the vessels (depreciation, salaries,
docking fees, and other expenses) is $210,000 per month. Under these conditions, the break-
even point in tickets is 5,250 and the break-even point in sales dollars is $315,000.
Name: Gururaj Hebbalaguppe Nagendra
Student No: 041126946
Course: MGT1217 - Financial and Management Accounting
Foundations

1.Suppose Royal Hellenic Cruiseline cuts its dinner cruise ticket price from $60 to $40 to
increase the number of passengers.
1A: Compute the new break-even point in units and in sales dollars.
Answer: New Break-even Point in unit is 10,500 and in Dollar $4,20,000

Sales Price $ 40
Variable cost $ 20
Total Monthly Passanger 15000

Total Selling Price $6,00,000

Fixed Cost $2,10,000
Total Variable Cost $3,00,000
Net Profit $90,000
Contribution Margin (CM) = Selling Price/unit - variable Price/Unit $ 20

Break-even Point = Fixed Cost/Contribution Margin $ 10,500

Break-even Point In $ = Break-even Point * Sales Price $ 4,20,000

CVP Graph
$650,000
$420,000
$450,000
$250,000
$50,000
1 2 3 4 5 6 7 8 9 10 11
Sales 0 60000 120000 180000 240000 300000 360000 420000 480000 540000 600000
Rav-
enue
line
Fixed 210000 210000 210000 210000 210000 210000 210000 210000 210000 210000 210000
Ex-
pense
Ex- 210000 240000 270000 300000 330000 360000 390000 $420,00 450000 480000 510000
pense 0
Line

Sales Ravenue line Fixed Expense Expense Line

1B: Explain how changes in sales price generally affect the break-even point.

 The contribution margin per unit decreases when the selling price decreases.
 This decline signifies that the revenue generated from each ticket sold covers fewer
fixed costs.
Name: Gururaj Hebbalaguppe Nagendra
Student No: 041126946
Course: MGT1217 - Financial and Management Accounting
Foundations

 For the same fixed expenses to be covered, a larger number of units must be sold,
which raises the break-even point.
 By reducing the ticket price from $60 to $40, the computation results clearly
demonstrate that both the break-even point in units and the break-even threshold in
sales dollars increase when the ticket price is reduced.

2. Assume that Royal Hellenic Cruiseline does not cut the price. Royal Hellenic Cruiseline
could reduce its variable costs by no longer serving an appetizer before dinner. Suppose this
operating change reduces the variable expense from $20 to $10 per passenger.
2A: Compute the new break-even point in units and in dollars.
Answer: New Break-even Point in unit is 4,200 and in Dollar $2,52,000

Sales Price $ 60
Variable cost $ 10
Total Monthly Passanger 15000

Total Selling Price $9,00,000

Fixed Cost $2,10,000
Total Variable Cost $1,50,000
Net Profit $5,40,000
Contribution Margin (CM) = Selling Price/unit - variable Price/Unit $ 50

Break-even Point = Fixed Cost/Contribution Margin $ 4,200

Break-even Point In $ = Break-even Point * Sales Price $ 2,52,000
CVP Graph
$850,000
$650,000
$450,000 $252,000
$250,000
$50,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
0 S36 72 10 14 18 21 25 28 32 36 39 43 46 50 54 57 61 64 68 72 75 79 82 86 90
a00 00 80 40 00 60 20 80 40 00 60 20 80 40 00 60 20 80 40 00 60 20 80 40 00
l 0 0 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
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21 F21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21
00 i 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
00 x00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
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21 E21 22 22 23 24 24 $2 25 26 27 27 28 28 29 30 30 31 31 32 33 33 34 34 35 36
00 x60 20 80 40 00 60 52, 80 40 00 60 20 80 40 00 60 20 80 40 00 60 20 80 40 00
00 p00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
e 0
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Name: Gururaj Hebbalaguppe Nagendra
Student No: 041126946
Course: MGT1217 - Financial and Management Accounting
Foundations

2B: Explain how changes in variable costs generally affect the break-even point.

 With a decrease in variable costs, the contribution margin per unit rises.
 When the variable costs are lower, each ticket sold helps cover fixed costs more.
 Due to this, selling fewer units to cover the same fixed expenses results in a lower
break-even point.
 As shown in the computation results, reducing the variable cost from $20 to $10 per
passenger lowers the break-even point in terms of units and sales.