I have 6 extensive questions and Id like to ask for explanations and answers to them. Thanks!

ONE:

In a recent news report, the following statement was made: "A report put out by brokerage house CLSA about Jet Airways said that the fall in ATF (fuel) prices has brought down the load factors (flight occupancy) required for the airlines to break even from 78 percent to 63 percent."The load factor is the percentage of available seats on a flight that are occupied.

Discuss

• What are some important assumptions commonly made in CVP analysis?
• What significantassumptions and limitations should be considered when using this piece of information?
• Do these assumptions impose serious limitations on the analysis? Why or why not?

TWO:

The cost per seat-mile on a major U.S. airline is 24.1 cents. In order to estimate the cost of flying a passenger from Pensacola, FL, to Denver, CO, we should multiply 1,184 miles by 24.1 cents.

Discuss

• Do you agree or disagree? Explain your reasoning.
• What would you suggest to estimate the cost of a flight?

THREE:

Often airline frequent flier programs upgrade high volume passengers one, three, or five days in advance.

Discuss

• What are the differential costs of this practice?
• What are the opportunity costs?
• What are the opportunity costs of not doing this?
• Would it be wise to sell a seat to a passenger walking up to the gate at the last minute a ticket based on the variable cost? Why or why not?

FOUR:

You are currently working as a contractor building state of the art airports. One of the managerial accountants of the company you work for comes to talk to you about the budget for a project on which you have taken the lead. He wants to know your estimate for the cost of the project. You know that your future with the company depends on your performance in relation to this budget. Your best guess for this project is that it will cost $2,000,000.

Discuss

• What do you say to your boss and why?

FIVE:

Pick an organization within the airline industry that you are familiar with or interested in learning about. Identify an example of when a favorable cost variable would not be good news for the performance of the organization.

Discuss

• What department would be responsible for the variance?
• What would you recommend to correct the variance?
• Explain your reasoning.

SIX:

JetSuite, a private jet charter company, prepares the master budget by taking each division manager's estimate of revenues and costs for the coming period and entering the data into the budget without adjustment. At the end of the year, division managers are given a bonus if their actual division profit exceeds the budgeted profit.

Discuss

• What problems do you see with this system?
• What are the dangers of using only business unit measures to evaluate the performance of business unit managers?

Recently you overheard a manager at JetSuite saying "If every division manager maximizes divisional income, we will maximize firm income. Therefore, divisional income is the best performance measure."

• Comment on and discuss this statement.