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 such flight (Flight 482) follows: $ 35,000 2,800 32,200 100.0% s. 92.0% Ticket revenue (125 seats x Sex occupancy * $350 ticket price) Less: Variable expenses ($28 per person) Contribution margin Lesst Flight expenses: Salories, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight attendants Baggage loading and flight preparation Overnight costs for flight crew and attendants at destination Total flight expenses Net operating loss 4,400 1,750 3,500 16,500 10,500 1,200 4,200 700 43,050 5.(10,850) The following additional information is available about Flight 482 a. Members of the flight crew are paid fixed annual salaries, whereas the flight attendants are paid by the flight 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 is in a high-risk area. The remaining two-thirds would be unaffected by a decision to drop Flight 482 The baggage loading and flight preparation expense is an allocation of ground crew's salaries and depreciation of ground equipment. Dropping Flight 482 would have no effect on the company's total baggage loading and flight preparation expenses dit Flight 482 is dropped Pegasus Airlines has no authorization at present to replace it with another tight e Depreciation of aircraft is due entirely to obsolescence Depreciation due to wear and tear is negible 1 Dropping Flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fieet or the number of light crew on its payroll 1 Required: 1. Prepare an analysis showing what impact dropping Flight 482 would have on the airline's profits. (Do not round intermediate calculations. Negative amounts should be indicated with a minus sign.) Contribution margin lost if the flight is discontinued Flight costs that can be avoided if the flight is discontinued Flight promotion Fuel for alrcraft Liability insurance Salaries, flight assistants Overnight costs for flight crew and assistants Net Increase in profits. If the flight is discontinued $ 0