ABC Airlines is a commercial airline that targets business and nonbusiness travelers. In recent months, the airline has been unprofitable. The company has break-even sales volume of 75% of capacity, which is significantly higher than the industry average of 65%. ABC's CEO, Richard Buchanan, is concerned about the recent string of losses and is considering a strategic plan that could reduce the break-even sales volume by increasing ticket prices. He has asked for your help in evaluating this plan. Instruction: As management accountants, write a brief memo to Richard Buchanan evaluating this strategy by discussing the advantages/disadvantages of increasing the ticket prices and its effect on the break even sales volume for ABC Airlines.
Q: Horizon Corporation manufactures personal computers. The company began operations in 2013 and…
A: Ethics: In business, ethics refer to a set of moral values that govern the business operations and…
Q: O’Toole Glassworks, Co. in Dublin, Ireland, is a manufacturer of glass bottles. The company has been…
A: Cost accounting A method of managerial accounting under which the total cost of production is…
Q: Tool Industries manufactures large workbenches for industrial use. Sam Hartnet, the Vice President…
A: Target profit is the amount of profit that an entity targets or is expected to achieve in the future…
Q: Tool Industries manufactures large workbenches for industrial use. Sam Hartnet, the Vice President…
A: According to the question, we are required to compute the current cost per unit or workbenches. As…
Q: A 100-year-old manufacturing firm has had an excellent reputation for high-quality products, with…
A: Answer: Correct option is option (b) A younger workforce will likely be less educated and trainable.…
Q: Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is…
A: Here, Cost of Inputs is $50,000 Production Costs is $30,000 Revenue is $83,000
Q: Hunger Industries operated as a monopolist for the past several years, earning annual profits…
A: Estimated loss due to regaining monopoly position is $100 million Estimated annual profit is $40…
Q: McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $825 per set and…
A: Selling price of new line of golf club is $825 per set. Variable cost per set of new club is $385…
Q: According to an article in STLToday.com, "Anheuser Busch-InBev's tougher line toward…
A: The US division loses some suppliers who cannot adjust to the new policy of company of taking as…
Q: Bubbles Inc. has observed that their primary product, Apex Wrap is losing market share. Due to this…
A: Rolling budget: A rolling budget is a budget prepared by the company with a speciality that the…
Q: The airline industry was hit particularly hard after the 9/11 attacks on the World Trade Center in…
A: Depreciation is the non- cash expenditure which is defined as the method under which the cost is…
Q: Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating…
A: Avoidable costs are those, which could be reduced by choosing one course of action over other;…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: Activity based costing (ABC) is the costing method which allocates the overheads (activity…
Q: He has asked for your help in evaluating this plan.
A: Break-even Point: It refers to a point in the level of operations at which a company experiences…
Q: Peterson Corporation is considering implementing a JIT production system. The new system would…
A: Just-In-Time production (JIT) system is a managerial approach in which minimum inventories are kept…
Q: Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last…
A: Variable cost means the cost which vary with the level of output and fixed cost means the cost which…
Q: the cost of inputs. Finally, there is the 3rd OM option, which would reduce production costs by 25%.…
A: Profit means the financial benefit earned when the income from a business activity exceeds the costs…
Q: Dana Wise, president of Tidwell Company, recently returned from a conference on quality and…
A: 1. Prepare a simple quality cost report classifying costs by category.
Q: What are the ethical issues involved in the case, and how would you resolve them?
A: Given case is: ENVIRO-WEAR had reached $25,000,000 in sales in its sixth year, when a disastrous set…
Q: Nico Parts, Inc., produces electronic products with short life cycles (of less than two years).…
A: The question is based on the concept of Cost Accounting.
Q: Dropping a product line, selling more tours. Nelson River Tours, a division of Old World Travel,…
A: 1. State the effect that the company would drop the advanced tours.
Q: The vice president of manufacturing is perplexed. When the new Sunbeam Plant bega rations three…
A: Here asked for multi question as per guidelines we will solve first question for you. If you need…
Q: before I make any move. Our division’s return on investment (ROI) has led the company for three…
A: Hence, 0.105 % is the profit margin for this year. It is obtained by dividing net operating income…
Q: I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings…
A: Margin= Net operating Income/Sales = 1814600/21100000 = 8.6% Turnover=…
Q: Compute the Office Products Division’s ROI for this year. 2. Compute the Office Products Division’s…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Toole Glassworks, Co. in Dublin, Ireland, is a manufacturer of glass bottles. The company has been…
A: Monthly profit statement for September and October a) Absorption Costing Particulars September…
Q: Galveston Pump Corporation is considering implementing a JIT production system. The new system would…
A: Definition: Just-in-time: Just-in-time is a system of managing inventory by reducing the storing…
Q: Galveston Pump Corporation is considering implementing a JIT production system. The new system would…
A:
Q: Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items…
A: (i) Sales = $3 billion Gross Profit margin = 55% Gross Profit = $3 billion×55%=$1.65 billion (ii)…
Q: At the BlueFin Bank corporate headquarters, management was discussing the potential of outsourcing…
A: Outsourcing refers to a mutual deal between two firms in which one firm hires another firm to do…
Q: Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national…
A: Materials are the actual goods utilized to make a product. Direct materials for a baker, for…
Q: A corporation has an excess input VAT due to its excessive local purchases of goods and services.…
A: VAT is a consumption tax on products and services levied at each level of the supply chain where…
Q: Many of the benefits of a balanced scorecard approach are evident in the improved operations at…
A: Kaplan & Norton’s Balance scorecard is a management tool which recognizes that the evaluation of…
Q: I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings…
A: Return on Investment(ROI):-It is performance measures that evaluate investment efficiency in…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: The answer is given below:
Q: Infinity Designs, an interior design company, has experienced a drop in business due to an increase…
A: Given:
Q: Sun Airlines is a commercial airline that targets business and non-business travelers. In recent…
A:
Q: Wells Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage…
A: The generally accepted accounting principles (GAAP) are the principles that should be followed by…
Q: Charle's Furniture Store has been In business for several years. The firm's owners have described…
A: Hello, since the student has posted multiple questions, we will answer the first two requirements…
Q: Galveston Pump Corporation is considering implementing a JIT production system. The new system would…
A:
Q: O'Toole Glassworks, Co. in Dublin, Ireland, is a manufacturer of glass bottles. The company has been…
A: In marginal costing, the cost of production does not include the fixed manufacturing overheads.…
Q: Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national…
A: Relevant Costing: Relevant cost is the cost for the special orders. The Relevant Cost: All the…
Q: O’Toole Glassworks, Co. in Dublin, Ireland, is a manufacturer of glass bottles. The company has been…
A: All amount in (currency in Euro, €).
Q: Whitaker Company produces two models of blenders for restaurants: the “Super Model” (priced at…
A: Total overhead=Machining Cost+Inspection Cost+Rework Cost Overhead per machine hour=Total…
Q: Horizon Corporation manufactures personal computers. The company began operations in 2012 and…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past…
A: Units costs are the cost for one product. They are computed by dividing total cost with number of…
Q: “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings…
A: Hence, 10.40 % is the profit margin for this year. It is obtained by dividing net operating income…
Q: Galveston Pump Corporation is considering implementing a JIT production system. The new system would…
A: Calculate annual relevant benefits and cost from implementing JIT production: Particulars…
ABC Airlines is a commercial airline that targets business and nonbusiness travelers. In recent months, the airline has been unprofitable. The company has break-even sales volume of 75% of capacity, which is significantly higher than the industry average of 65%. ABC's CEO, Richard Buchanan, is concerned about the recent string of losses and is considering a strategic plan that could reduce the break-even sales volume by increasing ticket prices. He has asked for your help in evaluating this plan.
Instruction:
As
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Sun Airlines is a commercial airline that targets business and non-business travelers. In recent months, the airline has been unprofitable. The company has break-even sales volume of 75% of capacity, which is significantly higher than the industry average of 65%. Sun’s CEO, Neil Armstrong, is concerned about the recent string of losses and is considering a strategic plan that could reduce the break-even sales volume by increasing ticket prices. He has asked for your help in evaluating this plan.Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats x 40% occupancy x $200 ticket price) Variable expenses ($15 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight assistants Baggage loading and flight preparation. Overnight costs for flight crew and assistants at destination Total flight expenses Net operating loss $ 14,000 1,050 12,950 $ 1,800 750 1,550 5,800 4, 200 1,500 1,700 300 17,600 $ (4,650) 100.0% 7.5 92.5% The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number…Dropping or Retaining a Flight Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a “high-risk” area. The remaining two-thirds would be unaffected by a decision to drop flight 482. c. The baggage loading and flight preparation expense is an allocation of ground crews’ salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on…
- Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past several years despite an increase in revenues. With profits declining and revenues increasing, Rockness knew there must be a problem with costs. Rockness sent an e-mail to his executive team under the subject heading, “How do we get Rockness Bottling back on track?” Meeting in Rockness’s spacious office, the team began brainstorming solutions to the declining profits problem. Some members of the team wanted to add products. (These were marketing people.) Some wanted to fire the least efficient workers. (These were finance people.) Some wanted to empower the workers. (These people worked in the human resources department.) And some people wanted to install a new computer system. (It should be obvious who these people were.) Rockness listened patiently. When all participants had made their cases, Rockness said, “We made money when we were a smaller, simpler company. We have grown,…Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past several years despite an increase in revenues. With profits declining and revenues increasing, Rockness knew there must be a problem with costs. Rockness sent an e-mail to his executive team under the subject heading, “How do we get Rockness Bottling back on track?” Meeting in Rockness’s spacious office, the team began brainstorming solutions to the declining profits problem. Some members of the team wanted to add products. (These were marketing people.) Some wanted to fire the least efficient workers. (These were finance people.) Some wanted to empower the workers. (These people worked in the human resources department.) And some people wanted to install a new computer system. (It should be obvious who these people were.) Rockness listened patiently. When all participants had made their cases, Rockness said, “We made money when we were a smaller, simpler company. We have grown, added…Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (165 seats × 40% occupancy × $230 ticket price) $ 15,180 100.0 % Variable expenses ($17.00 per person) 1,122 7.4 Contribution margin 14,058 92.6 % Flight expenses: Salaries, flight crew $ 1,900 Flight promotion 790 Depreciation of aircraft 1,550 Fuel for aircraft 5,500 Liability insurance 5,100 Salaries, flight assistants 1,400 Baggage loading and flight preparation 1,900 Overnight costs for flight crew and assistants at destination 800 Total flight expenses 18,940 Net operating loss $ (4,882 ) The…
- Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (165 seats × 40% occupancy × $220 ticket price)$ 14,520100.0%Variable expenses ($20.00 per person)1,3209.1Contribution margin13,20090.9%Flight expenses: Salaries, flight crew$ 1,800 Flight promotion760 Depreciation of aircraft1,800 Fuel for aircraft5,400 Liability insurance5,100 Salaries, flight assistants1,200 Baggage loading and flight preparation1,750 Overnight costs for flight crew and assistants at destination700 Total flight expenses18,510 Net operating loss$ (5,310) The following additional information is available about flight 482: Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips…Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats × 40% occupancy × $240 ticket price) $ 16,800 100.0 % Variable expenses ($18.00 per person) 1,260 7.5 Contribution margin 15,540 92.5 % Flight expenses: Salaries, flight crew $ 2,000 Flight promotion 790 Depreciation of aircraft 1,700 Fuel for aircraft 5,500 Liability insurance 5,100 Salaries, flight assistants 1,300 Baggage loading and flight preparation 1,950 Overnight costs for flight crew and assistants at destination 500 Total flight expenses 18,840 Net operating loss $ (3,300 ) The…Peterson Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, John Leung, is opposed to the idea of a new JIT system. He is concerned that the new system (a) will be too costly to manage; (b) will result in too many stock outs; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Susan Chow, is in favour of the new system, due to the likely result in cost savings. John wants Susan to revise her cost saving estimation because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
- Manuel Inc. produces textiles in many different forms. After recording lower than anticipated profits last year, Manuel has decided to shut down one of its divisions that is not performing well. The accounting manager has compiled the following data on the two divisions being considered for closing and has asked you to evaluate the short-term and long-term effects on profits of closing each division. Which division should be closed if Manuel is most concerned with increasing long-run profits? Winter Outerwear High-End Suits Net revenues $ 1,200,000 $ 5,200,000 Variable costs 660,000 2,160,000 Contribution margin 540,000 3,040,000 Controllable fixed costs 0 2,020,000 Controllable margin 540,000 1,020,000 Noncontrollable fixed costs 770,000 1,540,000 Contribution by division $ (230,000 ) $ (520,000 ) multiple choice Winter Outerwear High-End Suits Closing either would have the same…One Manila Inc.'s president, Zane Cruz, is concerned about the prospects of one of the firm's major products. The president has been reviewing a marketing report with Jom Lara, marketing product manager, for their top-of-the-line stereo amplifier. The report indicates another price reduction is needed to meet anticipated competitors' reduction in sales prices. The current selling price for OMI's amplifier is P35,000 per unit. It is expected that within three months OMI's two major competitors will be selling their comparable amplifiers for P30,000 per unit. This concerns CRUZ because OMI's current cost of producing the amplifiers is P31,500, which yields a P3,500 profit on each unit sold. The situation is especially disturbing because OMI had implemented an activity-based costing (ABC) system about two years ago. The ABC system helped them better identify costs, cost pools, cost drivers, and cost reduction opportunities. Changes made when adopting ABC reduced costs on this…Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…