Chapter 12: Profits have been decreasing for several years at Pegasus Airlines.

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (115 seats x 40% occupancy x $60 ticket price) 2,760 100% Variable expenses ($13.00 per person) 598 21.7 2,162 78.3% Contribution margin Flight expenses: 400 Salaries, flight crew 740 Flight promotion Depreciation of aircraft 510 160 Fuel for aircraft 270 Liability insurance 720 Salaries, flight assistants Baggage loading and flight preparation 190 Overnight costs for flight crew and assistants at destination 3,060 Total flight expenses (898) Net operating loss