Problem $13-21($Algo$)$ Dropping or Retaining a Flight $[$L$013-2]$

Profits have been decreasing for several years at Pegasus Airlines. In an effort to Improve the compary's performance, the company is

thinking about dropping several flights that appear to be unproflitable.

A typical income statement for one round$-$trip of one such flight $[$ilight $482]$ is as follows:

The follawing additional information is avalable about flight $482$ :

a$.$ Members of the flight crew are paid flwed annual salaries, whereas the flight assistants are pald based on the number of round trips

they complete.

b$.$ One$-$third of the llability insurance is a special charge assessed against filght $482$ because in the coinion of the insurance compary,

the destination of the flight is in a "high$-$risk" area. The remaining two$-$thirds would be unaffected by a decision to drop flight $492.$

c$.$ The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground

equipment. Dropping flight $492$ would have no effect on the company's tatal baggoge looding and filght preparation expenses.

di if flight $492$ is dropped, Pegasus Alrlines has no authorization at present to replace it with another flight.

e$.$ Alrcraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligble.

t$.$ Dropping filight $482$ would not allow Pegasus Airlines to reduce the number of alrcraft in its fleet or the number of tilight crew on its

payroll.

Required:

What is the financial actvantage $($disadvantage$)$ of discontinuing filght $482?$