Cost behavior and decisions Second City Airlines operates 35 scheduled round- trip flights between New York and Chicago each week. It charges a fixed one¬ way fare of $200 per passenger. Second City Airlines can carry 150 passengers per flight. Fuel and other flight-related costs are $5000 per flight. On-flight meal costs are $5 per passenger. Sales commission averaging 5% of sales is paid to travel agents. Flying crew, ground crew, advertising, and other administrative ex¬ penditures for the New York-Chicago route amount to $400,000 each week.

REQUIRED

(a) How many passengers must each of the 70 one-way flights have on average to make a total profit of $700,000 per week?

(b) If the load factor is 60% on all flights (that is, the flights are 60% full), how many flights must Second City Airlines operate on this route to earn a total profit of $500,000 per week?

(c) Are fuel costs flexible or capacity-related?

(d) Second City accepts standby passengers on flights 30 minutes before takeoff if space is available. Assume standby passengers book their tickets through a travel agent, and that the airline pays a flat $6 commission per standby ticket rather than a 5% sales commission. What is the minimum price Second City can charge a standby passenger to cover the incremental costs associated with that passenger?

(LO 1, 3)