As an analyst at Delta Airlines, you are asked to help the operations staff. Operations has identified a new method of loading baggage that is expected to result in a 40 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $3 per bag. Other costs are $2 per bag. Please show the problems step by step

a-1. What differential costs should the operations staff consider for the decision to use the new method next year?

Differential Cost?

a-2. What would be the cost savings per bag using it?

b. How would management use the information in requirement (a) and any other appropriate information to proceed with the contemplated use of the new baggage loading method? Which one?

A) Management would make their decision based strictly on the differential costs.

B)Management would use the information, but would also want to know the effect on quality.

C)Differential costs would not play a significant role in management's decision.