20-6iMake a Decision: Cost-Volume-Profit Analysis for Service Companies

MAD 20-1

Analyze Global Airs 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:

The airline estimates that the flight will sell 175 seats.

Determine the break-even number of passengers per flight.

Based on your answer in (a), should the airline add this flight to its schedule?

How much profit should each flight produce?

What additional issues might the airline consider in this decision?