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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 several

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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 several flights that appear to be unprofitable. A typical Income statement for one round-trip of one such light (Might 482) is as follows: $14,700 1.120 13,580 100.00 7.6 92.43 Ticket revenue (175 seats 40+ occupancy $210 tieket price) Variable expenses ($16.00 per person) Contribution margin Flight expenses Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for alcerat Liability insurance Salaries, tight assistants Baggage loading and flight preparation Overnight costs for flight crew and assistante at destination Total flight expenses Net operating loss $ 1,600 760 1,800 5,100 5.400 1,300 2,000 500 1,560 $14.980) The following additional information is available about flight 482: . Members of the Night crew are paid fixed annual salaries, whereas the fight assistants are paid based on the number of round trips 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 fight 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 light preparation expense is an allocation of ground chews'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 Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of light crew on its payroll Required: 1. What is the financial advantage (disadvantage) of discontinuing flight 482

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