Product costing and decision analysis for a service company Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month: Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs: The size of the company’s ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation: Three recent representative flights have been selected for the profitability study. Their characteristics are as follows: Instructions Determine the fuel, crew, and depreciation cost per mile flown. Determine the cost per arrival or departure by terminal city. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020
BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020

Solutions

Chapter
Section
Chapter 4, Problem 6PB
Textbook Problem

Product costing and decision analysis for a service company

Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:

Chapter 4, Problem 6PB, Product costing and decision analysis for a service company Blue Star Airline provides passenger , example  1

Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:

Chapter 4, Problem 6PB, Product costing and decision analysis for a service company Blue Star Airline provides passenger , example  2

The size of the company’s ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation:

Chapter 4, Problem 6PB, Product costing and decision analysis for a service company Blue Star Airline provides passenger , example  3

Three recent representative flights have been selected for the profitability study. Their characteristics are as follows:

Chapter 4, Problem 6PB, Product costing and decision analysis for a service company Blue Star Airline provides passenger , example  4

Instructions

Determine the fuel, crew, and depreciation cost per mile flown.

Determine the cost per arrival or departure by terminal city.

Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

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Chapter 4 Solutions

Managerial Accounting
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