Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is $780. The costs associated with the flight are as follows: Fixed costs for the flight: Crew salaries................................................ $ 4,860 Operating costs........................................... 50,000 Aircraft depreciation.................................. 25,000 Total......................................................... $ 79,860 Variable costs per passenger: Passenger check-in..................................... $ 20 Operating costs........................................... 100 Total......................................................... $ 120 The airline estimates that the flight will sell 170 seats. a. Determine the break-even number of passengers per flight. b. Based on your answer in (a), should the airline add this flight to its schedule? c. How much profit should each flight produce? d. What additional issues might the airline consider in this decision?
Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is $780. The costs associated with the flight are as follows: Fixed costs for the flight: Crew salaries................................................ $ 4,860 Operating costs........................................... 50,000 Aircraft depreciation.................................. 25,000 Total......................................................... $ 79,860 Variable costs per passenger: Passenger check-in..................................... $ 20 Operating costs........................................... 100 Total......................................................... $ 120 The airline estimates that the flight will sell 170 seats. a. Determine the break-even number of passengers per flight. b. Based on your answer in (a), should the airline add this flight to its schedule? c. How much profit should each flight produce? d. What additional issues might the airline consider in this decision?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1MAD: Analyze Global Airs cost-volume-profit relationships Global Air is considering a new flight between...
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Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is $780. The costs associated with the flight are as follows:
| Fixed costs for the flight: | |
| Crew salaries................................................ | $ 4,860 |
| Operating costs........................................... | 50,000 |
| Aircraft |
25,000 |
| Total......................................................... | $ 79,860 |
| Variable costs per passenger: | |
| Passenger check-in..................................... | $ 20 |
| Operating costs........................................... | 100 |
| Total......................................................... | $ 120 |
The airline estimates that the flight will sell 170 seats.
a. Determine the break-even number of passengers per flight.
b. Based on your answer in (a), should the airline add this flight to its schedule?
c. How much profit should each flight produce?
d. What additional issues might the airline consider in this decision?
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