Cost Allocations in Cost-Plus Pricing: Global Airlines is considering offering Business Class service on its transpacific routes. The problem Global faces is that it wants the Business Class service to provide an equivalent return to that which it obtains from its Economy Service. The Business Class fare must be set in such a way that it will provide the same margin per seat as the Economy Class fare. Management has some question as to the appropriate way to assure that this objective will be met. The published economy class fare is $800 one way. However, as noted by the revenue accounting manager, discount fares result in an average Economy Class fare of $500 one way.

Business Class service would incur a meal cost estimated at $45 per passenger. This compares with the Economy Class meal service cost of $25 per passenger.

One and a half Economy Class seats would fit into the space used for each seat in Business Class. Baggage handling, reservations, and similar incidental costs are estimated at $10 per passenger for the variable portion of those costs for either class.

Fixed costs per flight (crew salaries, fuel, landing fees, etc.) are allocated at $275 per passenger for either class.

Required: What fare for Business Class would meet management's objectives?