FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Chapter 6 Cost-Volume-Profit Analysis
297
Make a Decision
Cost-Volume-Profit Analysis for Service Companier
MAD 6-1 Analyze Global Air's cost-volume-profit relationships
Obj. 6
Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per
seat for the flight is $760. The costs associated with the flight are as follows:
Fixed costs for the flight:
Crew salaries.....
Operating costs .
Aircraft depreciation..
$ 5,000
50,000
25,000
$80,000
Total......
Variable costs per passenger:
Passenger check-in
Operating costs ....
Total...
$ 20
100
$120
The airline estimates that the flight will sell 175 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?
Obi 6
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Transcribed Image Text:Chapter 6 Cost-Volume-Profit Analysis 297 Make a Decision Cost-Volume-Profit Analysis for Service Companier MAD 6-1 Analyze Global Air's cost-volume-profit relationships Obj. 6 Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is $760. The costs associated with the flight are as follows: Fixed costs for the flight: Crew salaries..... Operating costs . Aircraft depreciation.. $ 5,000 50,000 25,000 $80,000 Total...... Variable costs per passenger: Passenger check-in Operating costs .... Total... $ 20 100 $120 The airline estimates that the flight will sell 175 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? Obi 6
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