o

You have a part-time job driving taxis for Tonys Taxis (TT). Your area of responsibility is

McCarran Airport and you are at the airport on a Friday afternoon and pick up a passenger

(Barney) who wants to go to Mt. Charleston.

o

The distance from McCarran Airport to Mt. Charleston costs $20 in gas plus $10 in wages

for one direction so the cost of a round trip is $60 ($40 in gas and $20 in wages to the driver).

o

TT normally charges $100 for a one way trip from the airport to Mt. Charleston. You charge

Barney the normal $100. At Mt. Charleston, a passenger (Fred) hails the taxi and needs a

ride to the airport but can pay only $20. There are no other passengers who need a taxi on

Mt. Charleston. Further, there are no potential passengers on the route back to the airport.

1) What is the income statement analysis for taking Barney to Mt. Charleston?

2) What is the income statement analysis for taking Fred from Mt. Charleston to the airport?

Given that the options are to take Fred or not take Fred and given the information

provided, should you take Fred if you are trying to maximize operating income?

3) Combined Total Approach (Combined Round Trip With Fred and Combined Round Trip

Without Fred Analysis)

4) Differential Approach