# Contribution Margin and Revenue

Question 1: Compute the revenue, variable expense and contribution margin for each cruise. Revenue value: The revenue is determined by multiplying the quantity by the price, in this case the quantity value is equal to the number of tourist.

Therefore Revenue = P*Q. When calculating the revenue where P = \$100 and Q = 30 Revenue = \$100*30 = \$3,000 Revenue =\$3,000 Variable expenses value: The variable expenses include: Labor expenses- include 6 experienced university graduates: For each trip 6 are required Each is paid \$100 per trip Therefore for each trip the total labor cost is: Labor cost = umber of employed*cost per unit Labor cost = 6*\$100 Labor cost = \$600 Refreshments: Tourist are offered refreshments, the cost per person is \$25 Refreshments cost = \$25 Total refreshments cost = cost per unit * number of tourist Number of tourists = 30 Total refreshment cost = \$25*30Total refreshment cost = \$450 Other operating expenses (including fuel cost) Other expenses =\$50 per trip Total expenses = labor expenses + refreshment costs + other operating expenses Total expenses = (6*\$100) + (\$25*30) + (\$50) Total expenses = \$600+\$450+\$50 Total expenses =\$1,100 Contribution margin: The differeence between total revenue and total variable expenses is referred to as the contribution margin, in this case given the total number of tourists = 30 Total revenue = \$3000 Total variable expenses = \$1,100 Contribution margin = 3,000 – 1,100 Contribution margin for each trip is = \$1,900From the above calculations the following values were determined: Total revenue = \$3,000 Total variable expenses = \$1,100 Contribution margin = \$1,900 This means that given the average number of tourists per cruise was 30, the revenue per cruise was \$3,000. Also given the same number of tourists the variable expenses per cruise was \$1,100 and given these two values the contribution margin was \$1,900 per cruise.

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