Heartland Airways operates commuter flights in three states. Due to a political convention held in Topeka, the airline added several extra flights during a two-week period. Additional cabin crews were hired on a temporary basis. However, rather than hiring additional flight attendants, the airline used its current attendants on overtime. Ushanti Gaines worked the following schedule on August 10. All of Gainess flights on that day were extra flights that the airline would not normally fly.

Regular time:	2 round-trip flights between Topeka and St. Louis (8 hours)
Overtime:	1 one-way flight from Topeka to Kansas City (2 hours)

Gaines earns $10 per hour and is paid time and a half when working overtime. Fringe benefits cost the airline $2 per hour for any hour worked, regardless of whether it is a regular or overtime hour.

PR 2-46 (Algo) Part 1: Compute the direct cost of compensating Gaines for her services

Required:

1. Compute the direct cost of compensating Gaines for her services on the flight from Topeka to Kansas City.

2. Compute the cost of Gainess services that is an indirect cost.

3. How should the cost computed in requirement 2 be treated for cost accounting purposes?

Multiple Choice

The overtime premium should be included in direct cost and allocated across all of the company's flights

The overtime premium should be included in overhead and allocated across all of the company's flights

The overtime premium should be considered a direct cost and charged directly to the specific company flights.

Gaines ended her workday on August 10 in Kansas City. However, her next scheduled flight departed Topeka at 11:00 a.m. on August 11. This required Gaines to dead-head back to Topeka on an early-morning flight. This means she traveled from Kansas City to Topeka as a passenger, rather than as a working flight attendant. Since the morning flight from Kansas City to Topeka was full, Gaines displaced a paying customer. The revenue lost by the airline was $82.

4-a. What type of cost is the $82?

multiple choice 1

Out-of-pocket cost

Average cost

Marginal cost

Opportunity cost

Differential cost

Sunk cost

4-b. To what flight, if any, is it chargeable?

multiple choice 2

August 11 flight

August 10 flight

Neither flight