Profits have been decreasing for several year at AirCanada. 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 on such flight (Flight 250) is a follow's: The following additional information is available for Flight 250: - Members of the flight crew are paid fixed annual salaries, whereas the flight attendants are paid by the flight - On-third of the liability insurance is a special charge assessed against Flight 250 because in the opinion of the insurance company, the destination is in a high-risk area. The remaining two-third would be unaffected by the decision to drop flight 250 . - The baggage loading and flight preparation expense is an allocation of ground crews salaries and depreciation of ground equipment. Dropping Flight 250 would have no effect on the company's total baggage loading and flight pre. Expenses - If flight 250 is dropped, AirCanda has no authorization at present to replace with another flight - Depreciation of aircraft is due entirely to obsolesce. Depreciation due to wear and tear is negligible. - Dropping flight 250 would not allow AirCanada to reduce the number of aircraft in its fleet or the number of flight crew on its payroll. Required: 1) Prepare an analysis showing what impact dropping Flight 250 would have in the airline's profits 2) The airline's scheduling officer has been criticized because only about 50% of the seats on AirCanada's flights are being filled, compared with an average of 60% for the industry. The scheduling officer has explained that AirCanada's average seat occupancy could be improved considerable by eliminating about 10% of the flights but that doing so would reduce profits. Explain how this could happen