(25 MARKS) lt seems that profits have been decreasing for several years at Mario Airlines System. The company is considering dropping the unprofitable flights in the effort to improve company's performance. The income statement for one round-trip for MF320 is as follows: Ticket revenue (175 seats @ 40% @ RM200) Variable expenses (RM15 per person) Contribution margin Flight expenses: Salaries of flight crews Flight promotion Depreciation of air craft Fuel of aircraft RM 14,000 1,050 12,950 (1,800) (750) (1,550) (5,800) (4,200) (1,500) (1,700) Liability insurance Salaries, flight assistants Baggage loading and flight preparation Overnight costs of crew and assistants at destination Net operating loss (4,650) The flight crews are paid fixed annual salaries while the flight assistants are paid based on the number of round trip completed. One-third of the liability insurance is a special charge against MF320 because the destination of the flight is a high risk area. The remaining two- thirds would be unaffected by a decision to drop MF320. If MF320 is dropped, Mario Airlines System has no authorization to replace it with another light. Dropping MF320 would not allow Mario Airlines System to reduce the mumber of aircraft in its fleet or number of flight crew on its payroll. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping MF320 would have no effoct on the company's total baggage loading and flight preparation expenses. Aircraft depreciation is wear and tear is negligible. Required: (19 marks) a) Prepare an analysis showing the impact dropping MF320 to its profit. (2 marks) b) Define the meaning of "Opportunity Cost "Variable costs and differential costs mean the same thing Discuss the statement. (4 marks) o) Page 4 of s