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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

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the companys 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 (170 seats \times 40% occupancy \times $200 ticket price) $ 13,600100.0%
Variable expenses ($19.00 per person)1,2929.5
Contribution margin 12,30890.5%
Flight expenses:
Salaries, flight crew $ 1,800
Flight promotion 760
Depreciation of aircraft 1,550
Fuel for aircraft 5,900
Liability insurance 5,100
Salaries, flight assistants 1,400
Baggage loading and flight preparation 1,950
Overnight costs for flight crew and assistants at destination 500
Total flight expenses 18,960
Net operating loss $ (6,652)

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