Question
A travel agency offers Worldwide Flight Ltd. 150,000 for a round-trip flight service from Singapore to Beijing on a jumbo jet. Worldwide Flight usually receives
A travel agency offers Worldwide Flight Ltd. 150,000 for a round-trip flight service from Singapore to Beijing on a jumbo jet. Worldwide Flight usually receives 250,000 in revenue from this route. The company has two aircrafts that are idle and could be used to fly on the proposed Singapore to Beijing route. The company has no plan to add any other new routes. Worldwide Flight will save 5,000 in reservation and ticketing expenses if the offer is accepted. The following relates to the revenue and cost information of a typical flight service on the proposed route: Typical Flight Service Between Singapore and Beijing Revenue: Passenger 250,000 Cargo 30,000 Total 280,000 Expenses: Variable expenses 90,000 Allocated fixed expenses 100,000 Total 190,000 Profit 90,000 Required: Should Worldwide Flight accept the offer? Explain your answer
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