Freeflight Airlines is presently operating at 70 percent of capacity. Management of the airline is considering dropping Freeflight's routes between Europe and the United States. If these routes are dropped, the revenue associated with the routes would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 20 percent.

Segmented income statements for a typical month appear as follows (all amounts in millions of dollars):

Routes	Within U.S.				Within Europe				Between U.S. and Europe
Sales	$	3.28			$	2.77			$	2.82
Variable costs		1.26				0.91				1.71
Fixed costs allocated to routes		1.68				1.27				1.37
Operating profit (loss)	$	0.34			$	0.59			$	(0.26	)

Required:

a. Prepare a differential cost schedule.

b.

Mels Meals 2 Go purchases cookies that it includes in the 10,000 box lunches it prepares and sells annually. Mels kitchen and adjoining meeting room operate at 70 percent of capacity. Mels purchases the cookies for $0.72 each but is considering making them instead. Mels can bake each cookie for $0.23 for materials, $0.18 for direct labor, and $0.51 for overhead without increasing its capacity. The $0.51 for overhead includes an allocation of $0.33 per cookie for fixed overhead. However, total fixed overhead for the company would not increase if Mels makes the cookies. Mel himself has come to you for advice. It would cost me $0.92 to make the cookies, but only $0.72 to buy. Should I continue buying them? Materials and labor are variable costs, but variable overhead would be only $0.18 per cookie. Two cookies are put into every lunch.

Mel suddenly finds an opportunity to sell boxed dinners. The new opportunity would require the use of the 30 percent unused capacity. The contribution margin from the dinners would amount to $3,300 annually.

Required:

a. If Mel decides to sell dinners, what are the total costs for both making and buying the cookies?