Jim Wright , Worldwide Airway's vice president for operations has been aprroach by a Chineses tourist agency about flying chartered tourist flights frong HongKOng to London. The tourist agency has offered worldwide airways $150,000 per rounf trip flight to a jumbo jet. Given the airlines usual occupancy rate and airfairs, a round trip jumbo jet flight between HongKong and London typically brings in revenue of $250,000. Thus, the tourist agency's specially priced offer requires a special analysis by Jim Wright. Wright also determines that the variable cost of the charter would be less than that of a typical flight because it will not incur variable cost for reservation and ticketing amounting to $5,000. Explain the Relevant Costing.

Topic: Relevant Costing Case 10 Given: Jim Wright, Worldwide Airway's vice president for operations has been approach by aa Chinese tourist agency about flying chartered tourist flights from Hong Kong to London. The tourist agency has offered Worldwide Airways $150,000 per round-trip flight on a jumbo jet. Given the airlines usual occupancy rate and air fares, a round-trip jumbo jet flight between Hong Kong and London typically brings in revenue of $250,000. Thus, the tourist agency's specially priced offer requires a special analysis by Jim Wright. Wright also determines that the variable cost of the charter would be less than that of a typical flight because it will not incur variable cost for reservation and ticketing amounting to $5,000. \begin{tabular}{|lrr|} \hline Table 1 & & \\ Revenue & $250,000 & \\ Passenger & 30,000 & $280,000 \\ Cargo & & \\ Expenses & $90,000 & \\ Variable & 100,000 & $190,000 \\ Fixed & & $90,000 \\ Profit & & \\ \hline \end{tabular} \begin{tabular}{|ll|} \hline Table 2 & \\ Special Price For Chartered Flight & $150,000 \\ Total Cost per Flight & $190,000 \\ Loss on Chartered Flight & $40,000 \\ \hline \end{tabular}