$ 16,000 100.0% 14,560 91% Ticket revenue (200 seats 40% occupancy * $200 ticket price) Variable expenses (518.00 per person) Contribution margin Flight expenses Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight assistants Baggage loading and flight preparation Overnight costs for flight crew and assistants at destination Total flight expenses Net operating loss $1,500 790 1,800 5,800 4,500 1,300 1,800 600 18,090 $ (3,530) The following additional Information is available about flight 482: a. Members of the flight crew are paid fixed annual salarles, whereas the flight assistants are paid based on the number of round trips they complete b. One third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company the destination of the flight is in a "high risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482 c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. 1. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft In its Meet or the number of light crew on its payroll Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482? Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482? Financial (disadvantage) Financial advantage Financial (disadvantage) 1.32 Come Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company's Grit 337 and its Sparkle silver polish Grit 337 is a coarse cleaning powder with many industrial uses. It costs $120 a pound to make and it has a selling price of $3,60 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $4.00 per jar This further processing requires one fourth pound of Grit 337 per far of silver polish. The additional direct variable costs involved in the processing of a jar of silver polish are: Other ingredients $ 0.65 Direct labor Total direct cont $ 1.97 Overhead costs associated with processing the silver polish are: Variable manufacturing overhead cost 25 of direct labor cost Fixed manufacturing overhead cost (per month) Production supervisor $ 3,100 Depreciation of mixing equipment $ 1,500 The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special purpose equipment acquired specifically to produce the silver polish. It can produce up to 11,500 Jars of polish per month. Its resale value is negligible and it does not wear out through use, Advertising costs for the silver polish total $2,900 per month. Variable selling costs associated with the silver polish are 5% of sales. Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder. Advertising costs for the silver pollsh total $2,900 per month. Variable selling costs associated with the silver polish ate 5% of sales. Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder Required: 1. How much incremental revenue does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.) 2. How much incremental contribution margin does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your intermediate calculations and final answer to 2 decimal places.) 3. How many Jars of silver polish must be sold each month to exactly offset the avoldable fixed costs incurred to produce and sell the polish? (Round your intermediate calculations to 2 decimal places.) 4. If the company sells 8,600 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 5. If the company sells 11,800 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any disadvantages" os a negative volue. Round your intermediate calculations to 2 decimal places.) 1 Incremental revenue 2 Incremental contbution margin 3 Number of jars that must be sold 4 Financial advantage (disadvantage) 5 Financial advantage (disadvantage) perjar per jar per month Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: $ 16,000 1,400 14,560 100.0% 9 91% Ticket revenue (200 seats * 40% occupancy $200 ticket price) Variable expenses ($18.00 per person) Contribution margin Flight expenses Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, fight assistants Bagage loading and flight preparation Overnight costs for flight crew and assistants at destination Total Flight expenses Tiet operating loss $ 1,500 790 1,800 5,300 4,500 1,300 1,300 600 18.090 $ 0,530) The following additional Information is available about flight 482: a. Members of the flight crew are paid foxed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company the destination of the flight is in a high-eisk area. The remaining two-thirds would be unaffected by a decision to drop flight 482 c. The baggage loading and flight preparation expense is an allocation of ground crews stories and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and light preparation expenses d, if flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another night, e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. 40D Alcatra thuhet Come Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company's Grit 337 and its Sparkle silver polish Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.20 a pound to make, and it has a selling price of $3.60 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $4.00 per jar. This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct variable costs involved in the processing of a jar of silver polish are: Other Ingredients $ 0.65 Direct labor Total direct cost 1.32 $ 1.97 Overhead costs associated with processing the silver polish are: Variable manufacturing overhead cost 25% of direct labor cost Fixed manufacturing overhead cost (per month); Production supervisor $ 3,100 Depreciation of miwing equipment 3.1.500 The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special purpose equipment acquired specifically to produce the silver polish. It can produce up to 11,500 Jars of polish per month Its resale value is negligible and it does not wear out through use. Advertising costs for the silver polish total $2,900 per month. Variable selling costs associated with the silver polish are 5% of sales Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder Required: Advertising costs for the silver polish total $2,900 per month. Variable selling costs associated with the silver polish are 5% of sales, Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder, Required: 1. How much incremental revenue does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.) 2. How much incremental contribution margin does the company earn per jar of polish by further processing Grit 337 rather than seling it as a cleaning powder? (Round your intermediate calculations and final answer to 2 decimal places.) 3. How many Jars of silver polish must be sold each month to exactly offset the avoidable fixed costs incurred to produce and sell the polish? (Round your intermediate calculations to 2 decimal places.) 4. If the company sells 8.600 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than seling is as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 5. If the company sells 11,800 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.) 1 Incremental revenue 2. Incremental contribution margin 3 Number of jars that must be sold 4. Financial advantage (disadvantage) 15 Financial advantage (disadvantago) per a perjar per month
