Problem 12-21 Dropping or Retaining a Flight [LO12-2]

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company?s performance, consideration is being given to 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:

Convergatioris M ChameMlEx-V n News|DasFrhiaard_ ' x .'_'Impeualjewelersircun'. q 260 I. w Problem 12-2I Dropplng or Retalning a Fllgl1t[LOI2-2] Pram hive been degenmvur severa'years 5k Pegam Arrhm. In an egn g \\murwe be cvmuinv's erurmanm' cummrahnn ham wen Iu druunm several Hum; Um auwar n be unumtihb A Warm Hiram: men-era mr une rum-mu m we sum mm mm 4&2] a as mum Tm reuenue mm 52m 140% muuancy x 57mm awe] 5 2mm 1mm Wrmmeexpznsaa (513 unper peregn) 52m 155 ounnrrbuugn margu. 2239 31 m Frgm eupereee Saranee ight new 5 m Frgm pmmmmn m Depreummn M mruan 450 rue rbr Mum! 2m) Lrabm, Insurance 21 n Samru' mg: mmanu m Baggage reegrng and gm preparmmn 175 ouerngm mm er mgm Haw ang assmamsmnummmn an mar mm 8303an Mel npzmlmg r s (545) , Tneruuuwrng mmnnm mum-mm e muabe mm mm 4.32 3 Members anne MM crew are para men annual sararu, wnereaa me mam aesmama are um baeeu un me number mruunmnusmey Camille]: b Onemrrn anne hamlm] ueurme e almmmame W against mm Aaz became rnme nurnrgn :11 me rneuranee can-um me aemmrun mm: mm rn z-mgnrar area Tne remawng Man'k wmm be unaeclen by a nemrgn m rnp ngmaaz c The baggage hnmng ann mgm prepamrun Expense an aHMalmn mgrnunn crews' mares ann uepreeamn mgrgunn egurprnem Druppuug mm 432 wnnl have nu eecl an me cumpanye mm baggage uramng ana mgm preparaugn eupeneee wugm 432 sumpps' Pegasusmrhm nae nu amnnrlzamn a1 presem m rebraee n wnn anmnerngm Arman aepreualmn e be enurer, m nhsmasnence Deprecmmn uue in wear and tear us negrrgrbe u rapprng ngm 432 wnuh'i nm anw pegaaue Alrlmes m reuuee me number m arrean n In: eel nr me number amgm crew an n: payruu -me Rwuued: 1 Preuare arr iniVySEahme wnm rmuact drvuum mum 432mm hm unlne arrlrne': arm: (A n)' \\ones' reducbrem ebuum be rndrcaced bya mrnue \"and Cnmnhuunn margrn um memur necumrnuea Less Ham amen-a4 can be murder: Mbe 11am mwmmm me Drummmn Fus' Var arruam Lrabrmy rneuranee Si'ansr mam int: owermm cmfnr ghtucw am a-mrna Ne! rneeeee manage} m pram me gm neeununuen '- : '?D E] ENG 918.92