Problem 12-21 Dropping or Retaining a Flight [LO12-2] Profits have been decreasing for several years at Pegasus Alrlines. 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: x $220 Ticket revenue (200 seats ticket price) Vari able expenses ($18.00 per person) X 40% occupancy 17,600 100,0% 440 8.2 Contributi on margin 16. 160 91.8% Flight expenses: Sal aries, flight erew Fli ght pronoti on Depreciation of aircraft Fuel for airer aft $ 2.000 760 ,550 , 300 ty insurance 500 Baggage loading and flight preparation Orernight costs for flight crew and assistants at destination .700 600 Total flight expenses 18, 510 (2,350) Net operating loss The following additional information is available about flight 482: a. Members of the flight crew are paid fixed 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 speclal charge assessed agalnst flight 482 because in the opinlon of the Insurance company, the destination of the flight is in a "high-risk" area. The remalning two-thirds would be unaffected by a decision to drop flight 482 . The baggage loading and flight preparation expense is an allocation of ground crews' sala ries 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 . Alrcraft depreclation is due entirely to obsolescence. Depreclation due to wear and tear Is negligible. Dropping flight 482 would not allow Pegasus Alrlines to reduce the number of alrcraft in its fleet or the number of flight crew on its payroll Required: 1. What Is the financial advantage (disadvantage) of discontinulng flight 482