Profits have been decreasing for several years at Pegasus Airlines. 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: Ticket revenue (160 seats x 40% occupancy x $250 ticket price) Variable expenses ($17.00 per person) $16,000 1,088 100.0% 6.8 Contribution margin Flight expenses: Salaries, flight crew Flight promotion 14,912 93.28 $ 1,800 750 Depreciation of aircraft Fuel for aircraft Liability insurance. Salaries, flight assistants 1,750 5,600 4,800 1,200 Baggage loading and flight preparation Overnight costs for flight crew and assistants at destination 1,900 700 Total flight expenses Net operating loss 18,500 $(3,588) 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. c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses.