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In an effort to increase profits. Pegasus Airlines is thinking about dropping several flights that appear to be unprofitable A typical income statement for one

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In an effort to increase profits. Pegasus Airlines is thinking about dropping several flights that appear to be unprofitable A typical income statement for one round-trip of one such flight (ilight 482 ) is as follows: The following additional information is avallable about flight 482 4. Members of the fight erew are patd fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete b. One-third of the labilify insurance is a special charge assessed against fight 482 because, in the opinion of the insurance company. the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482 c. The baggage loading and fight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment Dropping firght 48 ? would have no effect on these expenses d. If fight 482 is dropped. Pegasus Airlines will not replace it with another flight. e. Wear and tear on the aircraft caused by this fight is negligible. f. Dropping fight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll Required: 1. What is the financial advantage (disadvantage) of discontinuing fight 482

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