Question

Challenging economic conditions in several countries have pushed freight shipping companies to look for additional sources of revenue in addition to the revenue generated by hauling freight across the ocean. In recent years, one additional source of revenue for these freight companies has been to take on cruise passengers in addition to regular cargo.

Generally, there are only 2 – 12 passengers on a cargo ship. Demand for cargo ship cruises is high; travelers need to book months in advance.

Typically, passengers taking a cruise on a cargo (or container) ship will get an air-conditioned room with private bathroom for about $115 per day. Meals are included; passengers will share three meals a day with the crew. The rooms are cleaned once a week by the ship’s steward. Passengers have to wash their own clothes. Entertainment options include walking or running on deck, playing ping pong or darts, watching or listening to CDs/DVDs, and swimming in the on-ship pool if available on that particular ship. Passengers can disembark at various ports for sightseeing. Typically, a ship makes a 12 – 24 hour stop at each port on its itinerary for the loading and unloading of freight.

International regulations dictate that ships carrying more than twelve passengers have an on-board physician and a small hospital or treatment center. (Crew members, of which there are usually 15 – 25 per freighter, are not considered passengers.)

Question 5 of 5

1.0 Points

Should the ship depreciation costs be allocated to the cost of a passenger cruise when pricing the passenger cruise?

A. No

B. Yes

Answer 1

Correct Answer—No

Explanation

A ship is primary source of income is cargo Freights. Cruise Passengers is not the main business of the ship. A ship will only go onto a journey if it has any cargo to transport. Cruise Passengers is just an additional source of income which is nominal in comparison to cargo freight earned. The Depreciation of the ship is a cost which should be charged on the freight of cargo and not on Cruise Passengers. The Expenses Directly related to Cruise is a part of cost to be charged from Passengers.

In addition when the number of passengers is low, the burden of Depreciation would be high and unfair on the Passengers.