Internet Exercises

Carnival Corporation owns and operates a fleet of cruise ships. The company measures its activity in terms of passenger cruise-days. For example, a family of four on a five-day cruise is counted as 20 passenger cruise-days. Many of the expenses of cruise ships (e.g., the costs of food served to passengers) vary with the number of passenger cruise-days. In a press release dated December 21, 2000, the company reported passenger cruise-days of 16,750,000 for fiscal 2000 and 14,947,000 for fiscal 1999.

1. Use the Hoovers Online site at www.hoovers.com to access Carnival Corporation's 2000 financial information and locate the following information for 2000 and 1999: cost of goods sold and selling, general and administrative expenses. (After entering the company name in the site search box at the top of the page and pressing enter, choose the company from the list generated. Then, click on the "Financials" tab and then on "Annual Financials" under the Free Financial Information heading.)
2. Even though the data you will be using is very limited (only two data points) and Carnival's summary income statement information may include amounts not arising from the operations of its cruise ships, use the data provided above and the information you obtained from the Hoover's site to estimate the fixed and variable components of the company's costs using the high-low method. Show your work.
3. Express the relationship in terms of the cost formula Y= a + bX, where Y is total cost and X is passenger cruise-days.