Air Americo is about to introduce a daily round-trip flight from New York to Los Angeles and isdetermining how to price its round-trip tickets. The market research group at Air Americo segments themarket into business and pleasure travelers. It provides the following information on the effects of twodifferent prices on the number of seats expected to be sold and the variable cost per ticket, including thecommission paid to travel agents:Price ChargedVariable Costs perTicket# of Seats Expected to be SoldBusinessPleasure8002,1007530015018528530Pleasure travelers start their travel during one week, spend at least I weekend at their destination, andreturn the following week or thereafter. Business travelers usually start and complete their travel withinthe same workweek. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of$24,500 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, andflight-crew salaries total $188,000.If you could charge different prices to business travelers and pleasure travelers, would you? Show yourcomputations. Explain the key factor (or factors) for your answer.

BusinessPleasurePrice charged800800Expected seats to be sold300150Expected…

Answered: If you could charge different prices to…

If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. Explain the key factor (or factors) for your answer.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 7P: Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must...

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Hawk Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Hawk Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents: (Click the icon to view the pricing and ticket information.) Pleasure travelers start their travel during one week, spend at least one weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,000 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $188,000. Read the requirements.…
Airline pricing, considerations other than cost in pricing. Costal Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Costal Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents:
Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the companys new fleet of jet aircraft and a discount service using smaller-capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based on two possible levels of demand for service to Myrtle Beach: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars): a. What is the decision to be made, what is the chance event, and what is the consequence for this problem? How many decision alternatives are there? How many outcomes are there for the chance event? b. If nothing is known about the probabilities of the chance outcomes, what is the recommended decision using the optimistic, conservative, and minimax regret approaches? c. Suppose that management of Myrtle Air Express believes that the probability of strong demand is 0.7 and the probability of weak demand is 0.3. Use the expected value approach to determine an optimal decision. d. Suppose that the probability of strong demand is 0.8 and the probability of weak demand is 0.2. What is the optimal decision using the expected value approach? e. Use sensitivity analysis to determine the range of demand probabilities for which each of the decision alternatives has the largest expected value.
This question builds on your work from B-1. Competition is fierce for the Chicago to Atlanta route, and the airline realizes that it may need to reduce the current ticket price. They ask you to provide projections for number of reservations, number of denied passenger check ins (due to overbooking), penalties, sales, net income, and profit margin for this route at different ticket prices. The average number of reservations for this route is 184 when the ticket price is $420, use those figures as a base for your calculations. The airline conducted a price sensitivity analysis and determined that for every $20 increase in ticket price, demand will decrease by 1 ticket reservation. Similarly, ticket sales will increase by 1 reservation for every $20 decrease in ticket price. Using an appropriate data table, calculate the number of reservations, number of passengers denied check ins (due to overbooking), total penalties, total sales, net income, and profit margin (as a percentage) for…
A flight has 100 seats and a passenger fare of $130. The denied-boarding cost is $390 perdenied boarding, and the no-show rate is 0.16. Demand for this flight is extremely high; in fact,for any booking limit b<200, bookings will always hit the booking limit. What is the optimaltotal booking limit in this case? What is the corresponding expected net revenue? How muchdoes the airline gain from overbooking in this case? please help !!
Analyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of 180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. c. Determine the contribution margin per passenger for discounted tickets. d. Should Pacific Airways offer the discounted ticket plan? Answer the question by computing the incremental contribution margin per flight for the plan.
Same question as above but need help with the following questions please a-2. From an operating profit (loss) perspective for March, should Miles Audio accept the order from Lanoo Custom Systems? b. What is the minimum price Miles Audio should accept to take the special order from Lanoo Custom Systems?
A company is providing its product to the consumer through the wholesalers. The managing director of the company thinks that if the company starts selling through retailers or to the consumers directly, it can increase its sales, charge higher prices and make more profit. On the basis of the following information and consider variable cost is rial 2.50 per unit and fixed cost is rial 50000. (a) Advise the managing director whether the company should change its channel of distribution or not (with calculation and Justification). (b) Provide suggestions and recommendations on the basis of analysis.
Megacorp and Gadgetron are two competing gadget manufacturers. Information about the price and cost structures of the two manufacturers are given below. Megacorp Gadgetron Selling price per unit 160 160 Variable cost per unit 110 80 Fixed cost per month 46,000 100,000 Required: Calculate the sales volume that will result in Megacorp and Gadgetron having the same operating profit. Prepare a profit-volume graph by plotting profit as a function of the sales volume.Hint: Identify the point where sales volume is zero (i.e., fixed cost on y-intercept) and the break-even point (i.e., x-intercept where profit is zero) and connect the dots.
Skiable Acres operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Click the icon to view the information.) Read the requirements. Requirement 1. If Skiable Acres cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate Skiable Acres' projected income. Revenue at market price Less: Total costs Operating income
SnowDelight operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. (Click the icon to view the information.) Read the requirements. Requirement 1. If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate SnowDelight's projected income Revenue at market price Less: Total costs Operating income Requirements 1 If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? 2 Assume SnowDelight has found ways to cut its fixed costs to $36.000,000 What is its new target variable cost per skier/snowboarder?
Suppose that a small-town theater has six potential customers and is looking to implement price discrimination depending on when customers want to attend. Suppose the marginal cost of serving an additional customer is $1.50. The data provide information about the time of attendance and willingness to pay for a ticket. Customer Maximum willingness Time of attendance to pay Brandon $7 matinee Tyler $30 evening Austin $10 evening Alexis $8 matinee Ashley $20 evening Emily $15 matinee What should the theater charge for evening tickets? What should the theater charge for matinee tickets? $