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Determine which one of these decisions is the most profitable. Scenario 1: Increase the number of seats sold on the Atlanta/LA route to an
Determine which one of these decisions is the most profitable. Scenario 1: Increase the number of seats sold on the Atlanta/LA route to an average of 20/flight for an advertising cost of $180,000. Scenario 2: Increase the number of flights on the Chicago/LA route from 50 to 60 with no change in average load. Accomplished with $50,000 of advertising. (assume new weekend service) Scenario 3: Reduce the number of flights on the Atlanta/LA route from 50 to 40, but increase the average number of seats sold to 24 seats/flight Chicago Atlanta LA Total Ground personnel salaries $ 40,000 $ 80,000 30,000 $130,000 Airport landing fees 75,000 210,000 100,000 385,000 (charged per take off and landing) Rent Total ground costs Number arrivals/departures 50,000 90,000 80,000 200,000 $185,000 $380,000 $ 190,000 $715,000 of 150 150 100 400 Cost per departure/arrival $ 1,100 $ 2,400 $ 1,900 $5,400 Variable cost per dep/arr. $ 787 $ 1,800 $1,300 $3,867 Miles (one way) Chicago Atlanta LA Chicago Atlanta 600 1,600 2,000
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