3

Profits have been decreasing for several years at Pegasus Airlines, In an effort to improve the company's performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482 ) follows: The foilowing adalitional information is avallable about Flight 482 : a. Members of the flight crew are pald fixed annual salaries, whereas the flight attendants are paid by the flight: b. One-thind of the llability insurance is a special charge assessed against Flight 482 because, in the opinion of the insurance compary, the destination is in a high-tisk area, The remaining two-thirds would be unaffected by a decision to diop Flight 482. c. The baggage loading and tight preparation expense is an allocition of ground crew's salaties and depreciation of ground equipment. Dropping Flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. 4. If Fightit 482 is diopped, Pegasus Arlines has no authorization at present to replace it with another flight. e. Depreciation of aircraft is due entirely to obsolescence, Depreciation due to wear and tear is negligible. t. Dropping Filght 482 would not atlaw Pegasus Airlines to reduce the number of alicraft in its fleet of the mumber of llight crew on its: payroll. d. If Flight 482 is dropped, Pegasus Ailines have no effect on the company's total baggage loading and flight preparation expense e. Depreciation of aircraft is due entirlines has no authorization at present to replace it with another flight. f. Dropping Flight 482 would not allow to obsolescence. Depreciation due to wear and tear is negligible. payroll. Required: 1. Prepare an analysis showing what impact dropping Flight 482 would have on the airline's profits. (Do not round intermediate calculations. Negative amounts should be indicoted with o minus siant