Question
A large corporation maintains a fleet of three 30-passenger corporate jets that provide daily scheduled service between Detroit & several cities that are home to
A large corporation maintains a fleet of three 30-passenger corporate jets that provide daily scheduled service between Detroit & several cities that are home to its production facilities. The jets are used strictly for business travel. The executives bood reservations thru a centralized transportation office. Because of the limited number of seats available, the planes almost always fly full. Excess demand for seats is assigned by executive rank within the firm. The executive's budget is charged for the flight at the end of the month. The charge is based on the jet's total operating expenses during the month (to include fuel, pilot's salary & fringes, maintenance, licensing & landing fees, and 1/2 of the annual accounting depreciation) divided by the actual passenger miles logged in the month. This rate per passenger is multiplied by each passenger's mileage flown in the month. A. Describe the formula being used to calculate the cost per passenger mile flown. B. As passenger miles flown increases, what happens to the cost per passenger mile?
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