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 Ticket revenue (110 seats 40% $2,640 484 occupancy x $60 ticket price) 100% 18.3 Variable expenses ($11.00 per person) Contribution margin Flight expenses 2156 81.7% Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight assistants Baggage loading and flight $ 340 720 490 175 180 720 180 preparation Overnight costs for flight crew and assistants at destination 50 2,855 $(699) Total flight expenses 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 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