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11 September, 23:00

Luxury 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. Luxury 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 comma 000 per month. The company's relevant range extends to 16 comma 000 monthly passengers. If Luxury Cruiseline sells an additional 300 tickets, by what amount will its operating income increase (or operating loss decrease) ?

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  1. 11 September, 23:17
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    Luxury Cruiseline's operating income will increase by $9,000

    Explanation:

    Operating Income Before Additional 300 tickets

    Sales ($50*16,000) 800,000

    Less Variable Cost ($20*16,000) (320,000)

    Contribution 480,000

    Less Fixed Costs 210,000

    Operating Income 270,000

    Operating Income After Additional 300 tickets

    Sales ($50 * (16,000+300)) 815,000

    Less Variable Cost ($20 * (16,000+300)) (326,000)

    Contribution 489,000

    Less Fixed Costs 210,000

    Operating Income 279,000

    Effect of sells an additional 300 tickets

    Operating Income After Additional 300 tickets 279,000

    Operating Income Before Additional 300 tickets 270,000

    Change in Operating Income 9,000
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