Apollo Air is suffering from declining profits is therefore considering cancelling several flights One specific flight (AA231) is as follows Ticket revenue (250 seats sold X 40 occupancy X $400 ticket) $40,000 Less Variable Costs ($35 ticket) $8,750 Contribution margin $31,250 Less Flight expenses Salaries Pilots $4,200 Aircraft Fuel $18,000 Insurance, Liability $5,200 Salaries Flight Attendants $3,000 Baggage and ground crew fees $5,000 Amortization of airplane $1,500 Total Flight expenses $36,900 Net operating loss ($5,650) The following additional information is available about flight AA231 Pilots are paid on salary, while flight attendants are paid by the flight Dropping flight AA231 would not result in reducing the overall number of aircraft Aircraft amortization is based on obsolesce and not due to wear and tear Liability insurance is 50 related to this specific flight 50 is allocated based on a general corporate policy If the flight is dropped there is no ability to replace it with another flight Baggage fees are allocated based on airport and would still be paid regardless of this flight Required 1 Show an analysis showing what impact dropping flight AA231 would have on Apollo Airs profit Provide a recommendation as to whether or not they should continue the flight (20 marks)

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Posted on Jun 29, 2024

Apollo Air is suffering from declining profits & is therefore considering cancelling several flights. One specific flight (AA231) is as follows: Ticket revenue (250 seats

Apollo Air is suffering from declining profits & is therefore considering cancelling several flights. One specific flight (AA231) is as follows:

Ticket revenue (250 seats sold X 40% occupancy X $400/ticket) $40,000

Less: Variable Costs ($35/ticket) $8,750

Contribution margin $31,250

Less: Flight expenses

Salaries: Pilots $4,200

Aircraft Fuel $18,000

Insurance, Liability $5,200

Salaries: Flight Attendants $3,000

Baggage and ground crew fees $5,000

Amortization of airplane $1,500

Total Flight expenses $36,900

Net operating loss ($5,650)

The following additional information is available about flight AA231

Pilots are paid on salary, while flight attendants are paid by the flight
Dropping flight AA231 would not result in reducing the overall number of aircraft
Aircraft amortization is based on obsolesce and not due to wear and tear
Liability insurance is 50% related to this specific flight & 50% is allocated based on a general corporate policy.
If the flight is dropped there is no ability to replace it with another flight
Baggage fees are allocated based on airport and would still be paid regardless of this flight

Required:

1. Show an analysis showing what impact dropping flight AA231 would have on Apollo Airs profit. Provide a recommendation as to whether or not they should continue the flight (20 marks)