Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:

1	Fuel	$2,120,000.00
2	Ground personnel	788,500.00
3	Crew salaries	850,000.00
4	Depreciation	430,000.00
5	Total costs	$4,188,500.00

Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:

Airline Cost	Activity Base
Fuel, crew, and depreciation costs	Number of miles flown
Ground personnel	Number of arrivals and departures at an airport

The size of the companys ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation:

Terminal City	Ground Personnel Cost	Number of Arrivals/Departures
Charlotte	$256,000	320
Pittsburgh	97,500	130
Detroit	129,000	150
San Francisco	306,000	340
Total	$788,500	940

Three recent representative flights have been selected for the profitability study. Their characteristics are as follows:

		Miles	Number of	Ticket Price
	Description	Flown	Passengers	per Passenger
Flight 101	Charlotte to San Francisco	2,000	80	$695.00
Flight 102	Detroit to Charlotte	800	50	441.50
Flight 103	Charlotte to Pittsburgh	400	20	382.00

Required:

1.

Determine the fuel, crew, and depreciation cost per mile flown.

2.

Determine the cost per arrival or departure by terminal city.

3.

Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

4.

Evaluate flight profitability by determining the break-even number of passengers required for each flight assuming all the costs of a flight are fixed. Round to the nearest whole number.

Amount Descriptions
Flight income from operations
Fuel, crew, and depreciation costs
Ground personnel
Other income (expense)
Passenger revenue
Single plantwide factory overhead rate

1. Determine the fuel, crew, and depreciation cost per mile flown.

per mile

2. Determine the cost per arrival or departure by terminal city.

Terminal City

Arrival/Departure Rate per City

Charlotte

Pittsburgh

Detroit

San Francisco

3. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

Blue Star Airline

Flight Profitability Report

For Three Representative Flights

1		Flight 101	Flight 102	Flight 103
2
3
4
5
6

4. Evaluate flight profitability by determining the break-even number of passengers required for each flight assuming all the costs of a flight are fixed. Round to the nearest whole number.

Flight	Approximate Break-Even
101		passengers
102		passengers
103		passengers