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: $ 33,000 2,640 30,360 100.0% 8. 92.Ox Ticket revenue (150 seats 80% occupancy $275 ticket price) Less: Variable expenses (522 per person) Contribution margin Less! Flight expenses Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for alrcraft Liability Insurance Salaries,flight attendants Baggage loading and flight preparation Overnight costs for flight crew and attendants at destination Total flight expenses Net Operating Toss 4,100 1,650 3,300 15,800 9,900 1,150 3,950 660 48,510 $ (10,150) The following additional information is available about Flight 482 a. Members of the flight crew are paid fixed annual solaries, whereas the night attendants are paid by the flight One-third of the ability insurance is a specia charge assessed against Flight 482 because in the opinion of the insurance company the destinations in a higalak are. The remaining two-thirds would be unaffected by a decision to drop Flight 482 The boogage loading and light preparation expenses an allocation of ground crew Salories and depreciation of ground equipment Dipping Fight 482 would have no effect on the company's toolbeggage lend and fught prebiootion axpandex CF 982 ogoped, Pegasus Airlineshos no buthorization at present to place with another tight e Depreciation of aircrafts due entirely to obsolescence Debrett or due to wear and te nalible 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 c. 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 d. If Flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight e. Depreciation of aircraft is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f.Dropping Flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll od 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) Flight costs that can be avoided the flight is discontinued
