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Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consider, is being given to dropping several
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consider, is being given to dropping several flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482) follows: The following additional information is avallable about Fight 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. c. The baggage loading and flight preparation expense is an allocation of ground crew's salarles 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 Fight 482 is dropped. Pegasus Airlines has no authorization at present to replace it with another flightit. e. Depreciation of aircraft is due entirely to obsolescence. Depreciation due to wear and tear is negligible. 1. Dropping Flight 482 would not allow Pegasus Airlines to reduce the number of alrcraft in its fleet or the number of tight crew on its payroll. Required: 1. Prepare an analysis showing what impact dropping. Flight 482 would have on the afrline's profits. (Do not round intermediate colculations. Negotive omounts should be indicated with o minus sign.) Required: 1. Prepare an analysis showing what impact dropping Hight 482 would have on the alrline's profits, (Do not round intermediat calculations. Negative amounts should be indicated with a minus sign.)
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