pronts, Pegasus Airlines 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) The following additional information is available about flight 482. 100.0% 7.5 92.5%
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- Problem-solving 2: Dropping or Retaining a Flight Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consideration is being given to 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…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…Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482) follows:Ticket revenue (175 seats × 40% occupancy × $400 ticket price) $ 28,000 100.0%Less: Variable expenses ($15 per person) 2,100 7.5 Contribution margin 25,900 92.5%Less: Flight expenses: Salaries, flight crew 3,600 Flight promotion 1,500 Depreciation of aircraft 3,100 Fuel for aircraft 13,600 Liability insurance 8,400 Salaries, flight attendants 1,000 Baggage loading and flight preparation 3,400 Overnight costs for flight crew and attendants at destination 600Total flight expenses 35,200Net operating loss $ (9,300)The following additional information is available about Flight 482:a. Members of the flight crew are paid fixed annual salaries, whereas the…Many airlines frequent-flier programs upgrade elite (high-volume) flyers one, three, or five days in advance from economy to first class. Respond to the following in a minimum of 175 words: What are the differential costs of upgrading frequent flyers this close to the scheduled flight? (remember, differential revenues are not the same as differential costs) What are the opportunity costs of upgrading frequent flyers this close to the scheduled flight? What are the opportunity costs of not upgrading frequent flyers in this manner?
- 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…Question scope: Short term decision making Indigo Airlines provides its passengers with the option of joining their club, which entitles them to use club facilities at any Malaysian airport. Club members have access to a private lounge and restaurant, as well as discounts on food and drinks. Due to the pandemic, Indigo had been facing a decline in profit, thus their club has shown consistent loss. The recent statement are as follows: Sales revenue RM150,000 Variable expenses: (70,000) (40,000) (25,000) Food and drinks Personnel Variable overhead Contribution margin Fixed expenses: Club building Depreciation Supervisory salary Airport fees General overhead (allocated) Profit (loss) 15,000 (30,000) (25,000) (15,000) (10,000) (65,000) The variable fees for all clubs can be avoided if the club stops producing. Indigo Airlines, on the other hand, has agreed to keep the club house as supervisors will no longer be employed if the club closes, and Indigo will no longer pay airport fees.…Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: Selling price per membership Variable costs per membership Contribution margin Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P400 270 130 P150,000 70,000 25,000 50,000 If they continue operating, the company will be forced to reduce the membership selling price by 12.50%. The demand for the club is 4,000 memberships. 7. Shutdown costs 8. Shutdown savings 9. Shutdown point 12 Task Performance 1 *Property of STI Page 2 of 3 STI BM2021 10. Net advantage of continued/shut down operations 11. Should the club operations shut down or continue?
- Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: Selling price per membership Variable costs per membership Contribution margin Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P400 270 130 P150,000 70,000 25,000 50,000 If they continue operating, the company will be forced to reduce the membership selling price by 12.50%. The demand for the club is 4,000 memberships. 7. Shutdown costs 8. Shutdown savings 9. Shutdown pointGlobal Air is considerng a new flight between Atlanta and Los Angeles. The avaerage fare per seat for the flight is $760.The cost associated with the flight are as follows: Fixed cost for the flight Crew Salaries $5,000 Operating Costs 50,000 Aircraft Depreciation 25,000 Total: $80,000 Variable cost per passenger Passenger check-in $20 Operating Costs: 100 Total: $120 The airline estimates that the flight will sell 175 seats. a. determine the break-even number of passengers per flight b. Based on answer in (a), should the airline add this flight to it's schedule? c. How much profit should each flight produce? d. What additionl issues might the airline consider in this decision?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.