Accounting Case Study: Sailing Voyages Inc. CVP Analysis

This assignment analyzes Sailing Voyages Inc., a company offering sailing cruises, using Cost-Volume-Profit (CVP) analysis. The solution calculates revenue, variable costs (fuel, wages, food), and fixed costs (maintenance, marketing). It determines the contribution margin, break-even point, and target profit. The analysis includes an income statement and recommendations to manage fixed costs to improve net operating income. The case study explores how changes in cruise volume impact profitability and provides insights into the company's financial performance, offering a comprehensive overview of the company's financial performance and strategies for improvement.

Managerial Accounting
Title-
Student Name
Faculty Name -

ACCOUNTING 1
Question 1 & 2
Sailing Voyages, Inc
Revenue
Price per Person
$
100
Units Sold per Cruise 30
Cruise volume per period 100
Total Revenue per Cruise
$
3,000
Total Revenue per Period
$
300,000
Variable Costs
Fuel and misc supplies
$
50
Per diem wages
$
600
Food/Beverage
$
750
Total Variable Cost per Cruise
$
1,400

ACCOUNTING 2
Total Variable Cost per Period
$
140,000
Contribution margin
$
1,600
Gross margin
$
160,000
Fixed Costs
Maintenance, depreciation, marketing, licenses,
etc.
$
85,000
Total Fixed Costs per Period
$
85,000
Net Profit (Loss)
$
75,000
Breakeven Point
(Unit) =Fixed Expenses/Contribution Margin 53
Question 3
Revenue
Total Revenue per cruise
Variable $

ACCOUNTING 3
3,000.00
Total Variable Cost per cruise
$
1,400.00
Contribution Margin
CM Per Cruise
$
1,600.00
Additional Information
Total Fixed Costs
$
85,000.00
Target Profit
$
125,000.00
Contribution Margin
Calculation
85,000 + 125,000/1,600
= 131.25 cruises
As per the above calculation, it has been seen that 131.25 cruises needs to grasp this
objective $125000. Yes, it is a realistic expectation from cruise as these 131.25 cruises achieve
the objective. It is recommended that cruises has to maintain the fuels and utilize the assets
properly so that it can utilize cruise properly for long time and easily reach at the target profit.
Question 4

ACCOUNTING 4
Sailing Voyages, Inc
Contribution Income Statement
Total
Per
Unit
Sales (30 people per cruise x 100
cruises)
$
300,000
$
3,000
Less: Variable expenses 140,000 1,400
Contribution margin
$
440,000
$
4,400
Less: Fixed Expenses 85,000
Net operating income
$
525,000
According to calculation of contribution margin, it is observed that the contribution
margin is 140000 with the 1400 units. The company has to reduce the fixed expenses so that it
can attain its income goals. Reducing the fixed expenses is the main change of the company that
may help to attain the operating income that has been targeted as income goal. These changes
can be easily estimated and projected that does not affects the net income. CVP (Cost Volume
Profit) Analysis is a technique of accounting that looks at the affects that fluctuating level of
costs and volume has an operating profit. Fixed expenses contain the repairing and maintenance
expenditures and the others that should be reduce as it directly affects the net income in negative

ACCOUNTING 5
terms. It is recommended that the company has to maintain the fixed cost so that it can attain the
high revenue. The company has to adjust this cost by deducting the variable cost from sales and
fixed expenses from contribution margin with the motive to attain the large amount of net
operating income.