Accounting

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such filght (fight 482) is as follows: The following additional information is available about flight 482 : a. Members of the flight crew are paid fixed annual salaries, whereas the fight assistants are paid based on the number of tound trips they complete. b. One-third of the liablity insurance is a special charge assessed against flight 482 because in the opinion of the insurance company. the destination of the filight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482 . c. The baggage loading and fight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment, Dropping fight 482 would have no effect on the company's total baggage loading and fight preparation expenses. d. If flight 482 is dropped, Pegasus Airlines has no authorization ot present to replace it with another flight. e. Alrcraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping filght 482 would not allow Pegasus Airlines to reduce the number of aireraft in its fleet or the number of fight crew on its poyroll. Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482