OBJECTIVE: To identify the relevant costs and benefits from costs and revenue information available in the financial database to aid decision making in a timely manner.

REQUIREMENT: Short term decision making

Question

ASEAN AIRWAYS offers its passenger the opportunity to join ASEAN EXPRESS CLUB that entitles a traveler to use the club facilities at any ASEAN airports. Club privileges include a private lounge and restaurant, discounts on meals and beverages and use of a small health spa.

As with other airlines around the globe, ASEAN has been facing a decline in profit attributable to the Covid19 pandemic movement restriction. The Club has shown consistent loss.

The recent statement follows:

Sales revenue	SGD 150,000
Variable expenses: Food and beverages Personnel Variable overhead	(70,000) (40,000) (25,000)
Contribution margin	15,000
Fixed expenses: Club building Depreciation Supervisory salary Airport fees General overhead (allocated)	(30,000) (25,000) (15,000) (10,000)
Profit (loss)	(65,000)

All Clubs variable expenses can be avoided should the club be discontinued. However, ASEAN will continue to own the club building. The supervisory staff will no longer be employed if the club closes. Ruby will no longer pay the airport fee.

Required:

Decide whether ASEAN should discontinue the club operations. Show your computation.