MidCoast Airlines provides charter airplane services. In October, when the company is operating at 60% of its capacity, it receives a bid from the local college. The college is organizing a trip for a student group. The college budgeted only $70,000 for round-trip airfare. MidCoast Airlines normally charges between $90,000 and $100,000 for such service. MidCoast determines its total cost for the round-trip flight to Washington to be $89,000, which consists of the following.

Variable cost	$ 49,000
Fixed cost	40,000
Total cost	$ 89,000

Although the manager at MidCoast supports the colleges educational efforts, she is struggling to justify accepting only $70,000. (a) What is the contribution margin from accepting the offer? (b) Should the airline accept the $70,000 offer from the college?

What is the contribution from accepting the offer?

Revenue from trip

Varaibe cost of trip

Contribution Margin