Lucas Air Service, a sole proprietorship, provides charter flights on weekdays only. Earl Lucas, the owner, is
Question:
Lucas Air Service, a sole proprietorship, provides charter flights on weekdays only. Earl Lucas, the owner, is thinking of offering flying lessons on weekends. He has always pro- tected his weekends for family time and will give up his family weekends only if he can earn at least $9,000 per year extra. Estimates of demand for lessons suggest that, weather permitting, he could teach a full six-lesson day every Saturday and Sunday for the entire year.
Earl’s large plane could be used for about half of the lessons. He would borrow a smaller plane, owned by his friend Pat, for the other half. Fuel and maintenance would run about $45 per flying lesson with the large plane. With the small plane, fuel would cost $25 per lesson, and Earl would pay Pat $75 per day when he used the small plane regardless of how many lessons he gave in it.
Earl plans to use the large plane for advanced students and to charge them $75 for a lesson. He would use the small plane for beginners and charge them $65 per lesson.
Each weekend day that Earl opens for flight lessons he will incur $35 for the salary of his receptionist, utilities, and other expenses to keep his office open.
Required: (1) Prepare a schedule showing the daily profit if
(a) Earl gives from | to 6 advanced lessons only
(b) Earl gives from | to 6 beginner lessons only
(c) Earl offers both types of lessons on a given day for a total of 6 lessons (make the profit computation for only two situations: the situation where Earl gives 3 lessons of each type and the situation where Earl gives 4 advanced lessons and 2 beginner lessons).
(2) Is it more or less profitable for Earl to give 4 advanced lessons and 2 beginner lessons each day than to give 3 lessons of each kind each day? (3) If Earl gives 3 flight lessons of each type each day, how much profit could he earn if he gives lessons for 90 days?
(4) How much profit could Earl earn if he gives 6 advanced lessons in the large plane for each of 45 days and 6 beginner lessons in the small plane for each of 45 days?
(5) How much profit could Earl earn if he gives 6 advanced lessons in the large plane for each of 60 days and 6 beginner lessons in the small plane for each of 30 days?
(6) Explain why the mix of two-thirds advanced and one-third beginner lessons seems better than the mix of half advanced and half beginner lessons in the case where only advanced or only beginner lessons are scheduled on a given day. Lo1
Step by Step Answer:
Accounting Information For Business Decisions
ISBN: 9780030224294
1st Edition
Authors: Billie Cunningham, Loren A. Nikolai, John Bazley