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    Computing and Using the Operating Leverage Factors

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    Flow Cruiseline's nightly dinners cruise off the coast of Miami, San Francisco, Seattle. Dinner cruise tickets sell for $50 per passenger. Flow Cruiselines variable cost of providing the dinner is $10 per passenger and the fixed cost of operating the vessels (depreciation, salaries, docking fees and other expense) is $280,000 per month. The company's relevant range extend to 20,000 monthly passengers. The break even sales are 7,000 tickets sold.

    A. Compute the operating leverage factor when Flow Cruiselines sells 8750 dinner cruises.
    B. If volume increases by 7% by what percentage will operating factor increases?
    C. If volume decreases by 3% by what percentage will operating increases decreases?

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    https://brainmass.com/business/cost-volume-profit-analysis/computing-operating-leverage-factors-596323

    Solution Preview

    Flow Cruiselines nightly dinners cruises off the coast of Miami, San Francisco, Seattle. Dinner cruise tickets sell for $50 per passenger. Flow Cruiselines variable cost of providing the dinner is $10 per passenger and the fixed cost of operating the vessels ...

    Solution Summary

    This solution illustrates how to compute the operating leverage factor and how to apply it sales volume increases or decreases.

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