Management uses differential analysis to decide between two viable options. Proper use of differential analysis requires the ability to differentiate between relevant and irrelevant costs; that is $$ costs that are important to the decision and costs that have no weight on which choice is made. In this assignment you will practice your ability to recognize relevant and irrelevant costs.

At Global Airways, Penny Piper, Manager of Flight Scheduling, needs to make a decision about flight scheduling. Presently Global Airways flies from Chicago to Honolulu nonstop, but she is considering making a stop in Phoenix. The route would attract some additional passengers, but would also incur additional costs.

Penny has prepared the following data to help her in making this decision.

Revenues and Costs Under Two Alternatives

Nonstop Route With Stop in Phoenix Differential Amount

Passenger Revenue $$200,000$ $$225,000$ $$25,000$

Cargo Revenue $50,00050,0000$

Landing Fee in Phoenix $05,000(5,000)$

Use of Airport Gate Facilities $03,000(3,000)$

Flight Crew Cost $2,0002,500(500)$

Fuel $25,00030,000(5,000)$

Meals & Services $4,0005,000(1,000)$

Aircraft Maintenance $1,0001,0000$

Total Revenue less Costs $218,000228,500(10,500)$

each cost as relevant or irrelevant.

Then analyze the results to determine whether Global Airways should make the stop in Phoenix or continue with the non$-$stop flight. State the action Global Airways should take.